This study analyzed whether firms in the suspected earnings management zone of loss avoidance, as identified in Burgstahler and Dichev (1997), use discretionary accruals (hereafter AM) and real earnings management (hereafter RM) to report loss avoidance among listed companies. Furthermore, this study examined which earnings management tool is relatively more important if both are used for loss avoidance, separately for KOSPI and KOSDAQ listed firms. Prior studies failed to find evidence that firms in the loss avoidance zone use AM (Lee and Sohn, 2007; Park and Yoon, 2008). In contrast, prior studies reported that firms in the loss avoidance zone use RM to achieve loss avoidance (Roychowdhury, 2006; Kim, Ko, and Ko, 2008). However, prior studies that analyzed the relationship between the loss avoidance zone and AM did not employ the methodologies used in subsequent research. Additionally, domestic studies analyzing the relationship between the loss avoidance zone and RM primarily did not examine KOSDAQ listed firms. Therefore, this study focused on these aspects and re-examined whether firms in the loss avoidance zone actually use AM and RM to manage reported earnings upward. For this purpose, the study used data on domestic listed firms from 2000 to 2010, with 5,132 KOSPI firm-year observations and 5,498 KOSDAQ firm-year observations. The empirical results are as follows. First, firms in the loss avoidance zone were found to manage reported earnings upward for loss avoidance using not only RM but also AM, compared to firms in other zones. These results were consistent across both KOSPI and KOSDAQ listed firms. Second, when AM and RM were simultaneously considered in a single model to determine which tool is relatively more important by market type, the KOSPI sample showed a significant positive relationship only between the loss avoidance zone and RM, while the KOSDAQ sample showed a significant positive relationship primarily between the loss avoidance zone and AM. This finding indicates that KOSPI firms rely relatively more on RM, while KOSDAQ firms rely relatively more on AM for loss avoidance. These results demonstrate that managers' preferences for the two earnings management tools differ across the two market types when avoiding loss reporting. The results of this study are meaningful in that they provide empirical evidence that firms in the loss avoidance zone use AM, which prior studies had failed to discover. Moreover, this study is significant in that it extends these findings to show that firms in the loss avoidance zone use both AM and RM, not only among KOSPI firms but also among KOSDAQ firms. Furthermore, the results are significant in demonstrating that even when managers of listed firms use both earnings management tools for loss avoidance, there are relative preference differences between the two markets.