The purpose of this study is to find the impact of earnings management on EPS and in turn impact of EPS on share price. Data was taken of 13 listed companies of cement sector of Pakistan for the year 2005-2010. Discretionary accruals were used as a proxy of earnings management, measured using Modified Jones Model. Panel data regression was used to analyze the data. Results of the panel data regression showed positive relationships between earnings management and EPS; and between EPS and share prices. Firms observe high share prices when they report high EPS. In reality, high EPS reported by firm is a result of high level of earnings management. It’s evident; the EPS on which share prices are determined is not real. Firms manipulate EPS by using earnings management practices. So, shares of cement companies do not reflect true intrinsic value. These results will be useful for investors while making investment decisions. A change in the sector, sample size and the time period of data may give different results. In future, this model can be investigated on some different sector.