In this dissertation, I investigate the economic consequences of Statement of Financial Accounting Standards No. 158 (SFAS 158). SFAS 158 requires firms to move pension funding status from the footnotes to the balance sheet. Moving pension funding status from a footnote to the balance sheet improves the transparency and understandability of pension accounting, however it at the same time increases the pension liability recognized and decreases the shareholder's equity reported for firms with underfunded pension plans. I investigate whether firms take actions to mitigate the impact of SFAS 158. I also examine whether the market perceptions of the risk and cost of capital differ because of SFAS 158. I first find that while firms reduce the non-pension debt to equity ratio to minimize the cost of SFAS 158, they did not use discretionary accruals to offset the impact of SFAS 158. One interpretation of these findings is that firms' potential responses to the rule depend on the costs and benefits associated with that discretionary behavior. While accrual manipulations do not affect either real operations or cash flows, aggressive accrual manipulations can increase the probability of a qualified opinion from auditors, and financial penalties from regulators (SEC litigation). In contrast, real activity manipulation is more opaque than accounting earnings management, making it more difficult to detect by shareholders, SEC regulators, or auditors. I then find that the market perceived risk proxied by total equity risk increased after SFAS 158. However, I fail to find that the increased total equity risk is generally priced by the equity capital markets. Further analysis indicates that bond spread yield decreases after SFAS 158 for firms with underfunded pension plans, suggesting different behavior of debt investors and equity investors. This finding might be explained by the rich information environment specific to the debt market. Compared with the equity market, the debt market includes mainly sophisticated investors. Sophisticated investors have access to more firm-specific information than other investors. Given their access to potentially more informative data, the debt market response to SFAS 158 is different from the equity market. This dissertation contributes to the debate regarding the effectiveness of the pension accounting reforms incorporated in SFAS 158, and is useful to legislators, regulators, and researchers in assessing the anticipated costs and benefits of SFAS 158. In addition, this study lends support to the stream of research which documents that managers take actions to achieve certain financial reporting goals in response to new accounting rules. This study also provides insight into how firms take real actions to minimize the cost of having an under-funded defined benefit pension plan. Understanding these relationships have implications for interpreting pension numbers reported in the financial statements and designing pension accounting rules that prevent or minimize the possibility that managers take advantage of the complexity and subjectivity associated with pension accounting to influence reported earnings. Finally, this study contributes to the existing literature by highlighting the importance and necessity of considering investor sophistication in studies on recognition vs. disclosure. / Business Administration/Accounting

Introduktion/Problembakgrund: Earnings management (EM) är ett problem för både det enskilda företaget och samhället. EM innebär att företagsledningen manipulerar resultatet i syfte att vilseleda externa intressenter. Konsekvenserna av EM är ett minskat förtroende för den finansiella rapporteringen, vilket resulterar i en ineffektiv kapitalallokering. Tidigare studier i Nya Zeeland har konstaterat att sammansättningen av fastighetsportföljen påverkar benägenheten till EM. Däremot går resultatet inte att generalisera i andra länder, eftersom det finns skillnader i lagstiftningen. Det är därför av intresse att genomföra en studie för svenska börsnoterade fastighetsföretag. Det behövs för att skapa ett ramverk, vilket kan hjälpa externa intressenter att förstå, upptäcka och förebygga beteenden som ger upphov till EM. Syfte: Studiens syfte är att undersöka hur fastighetsportföljen påverkar benägenheten till EM hos svenska börsnoterade fastighetsföretag. Vidare har studien även som syfte att kartlägga sammansättning av företagens fastighetsportföljer. Estimera EM för fastighetsföretagen och studera hur fastighetsportföljen påverkar benägenheten till EM. Studien har även som syfte att undersöka hur EM påverkar fastighetsföretagens finansiella rapportering i avseende på tillförlitlighet och relevans. Teori: De teorier som använts i studien baseras på tidigare EM-studier, orsaken är att vi avser att använda de mest relevanta teorierna för att besvara studiens problemformulering. Studiens teoretiska referensram omfattas av; 1) EM 2) informations asymmetri, 3) earnings quality, 4) principal-agent teorin, 5) stewardship teorin, 6) signaleringsteorin och 7) prospect-teorin. Vidare beskrivs fastighetsmarknaden. Metod/Data: Studien baseras på en kvantitativ metod, en deduktiv ansats och ett objektivistiskt synsätt. Vi har inhämtat data från finansiella databaser och från fastighetsföretagens finansiella rapporter. I de finansiella rapporterna har vi manuellt inhämtat data för sammansättningen av fastighetsportföljerna utifrån fastighetskategori och fastighetsregion under åren 2005-2013. Vidare har vi skattat två kategorier av EM, accruals management (AM) och real activities manipulation (RAM). Vi har sedan skattat fastighetsportföljens inverkan på benägenheten till EM. Resultat/analys: Skattningarna av AM och RAM är i likhet med tidigare studier. Vidare tenderar fastighetsportföljen utifrån fastighetskategori att uppvisa flertal signifikanta resultat i jämförelse med fastighetsportföljen som baseras på fastighetsregion. Sammansättningen av företagens fastighetsportföljer tenderar att utgå ifrån en fastighetskategori i en fastighetsregion, vilket innebär att fastighetsföretagen tenderar att förvalta, äga och utveckla en viss fastighetskategori i en viss region. Slutsatser: I studien har vi kommit fram till att fastighetsportföljen tenderar att påverkar benägenheten till EM. Det innebär att traditionella teorier inom EM även bör beakta att sammansättningen av fastighetsportföljen påverkar benägenheten till EM. Utifrån resultatet konstaterar vi att tillförlitlighet och relevans i den finansiella rapporteringen minskar. Studiens resultat kan förklaras utifrån fastighetsrelaterade marknadsfaktorer.

In this study, we follow Cooper et al. (2017) and intend to further investigate income-decreasing real earnings management through altering production and discretionary expenditure and focus on such actions taken by management prior to stock repurchase. We take on a European perspective of IFRS on real earnings management and empirically test to what extent Swedish listed firms use real earnings management prior to stock repurchases to lower share prices. We follow Roydchowdhury (2006) and Cooper et al. (2017) and establish the firms normal level of real earnings management to compare with the period when firms anticipate stock repurchases. We present our data and results through descriptive statistics and use variables identified by Zang (2011) to perform correlation and regression tests accordingly with Cooper et al. (2017). Our results suggest that managers of Swedish firms on average engage in income-increasing real earnings management and decrease such management actions prior to stock repurchases. These findings emphasize the influence of real operating decisions by firms’ that must be considered by the market around major corporate events similar to repurchasing stock.

In this thesis, I examine earnings management issues in the UK context. The thesis consists of three essays. The first chapter investigates whether managers base their trade-off decisions among real earnings management, accruals-based earnings management, and classification shifting, on the costs, constraints and timing of each strategy in the UK. The empirical evidence suggests that some, but not all, costs and constraints play a role in managers’ trade-off decisions. Further, contrasting between firms that are most likely to have manipulated earnings and firms that are not likely to have manipulated earnings, I find no difference in the relation of constraints towards all earnings management forms. This indicates that cost and constraints do not capture entirely what they are designed to, in the first place. Finally, I document evidence that is consistent with managers using real and accruals-based earnings management as substitutes but fail to find evidence that classification shifting acts as a substitute. The second essay studies the effect of income smoothing via accruals-based and real earnings management on the relationship between current stock returns, current earnings and future earnings. I measure income smoothing as the contemporaneous correlation between changes in earnings management proxies and pre-managed income. Using a sample of non-financial publicly listed firms in the UK, I show that both accruals-based and real income smoothing measures are associated with significantly positive share price anticipation of earnings. These results are robust to different stock returns specifications, income smoothing measure calculations, abnormal accruals models and accumulation periods of stock returns. In the third and final essay, I investigate the impact of the level of accruals-based and real earnings management on measures of the amount of performance commentary in annual reports for a large sample of UK public firms. I use automated textual analysis to construct disclosure scores based on the amount of performance and causal commentary. The results suggest that firms with higher levels of earnings management have lower levels of disclosure of performance and causal commentary. The presence of bad news for the firm (missed analyst forecast, underperformance or earnings decline) affects the relationship between disclosure and accruals-based earnings management but not the relationship between disclosure and real earnings management.

<p>This thesis focuses on three important topics in corporate finance: corporate governance, management efforts to avoid debt covenant violations and the cost of such violations. The thesis adds to these aspects of the finance literature and the findings are reported in chapters two, three and four.</p> <p>The second chapter focuses on the role of corporate governance in determining the interactions between financial leverage and profits and attests to the validity of the trade-off theory of capital structure. It examines management’s financing choice behaviour in distinctly different corporate governance settings to ascertain the effect of governance mechanisms on such behavior. The estimation methodology allows for financial leverage, profits and governance to be determined jointly, using an instrumental variable approach. The results of the paper demonstrate that leverage is increasing in profits when controlled for agency problems, and good governance firms exhibit the results predicted by the trade-off theory of capital structure.</p> <p>The third chapter examines management’s earnings manipulation activities around debt covenant violation through accrual manipulation and real earnings management. Covenant restrictions are expected to influence these activities in the quarters surrounding and the quarter of the violation. Cross-sectional analyses reveal the use of such strategies to report higher earnings in the periods surrounding the covenant violation. The results also show disparity in the use of accrual based and real earnings management techniques.</p> <p>The fourth chapter investigates the relation between debt covenant violation and the cost of new borrowing from three different aspects: the incidence of violation, the timing of violation and the frequency of violation. The results show that there are significant benefits to not violating a debt covenant and violators are penalized by the creditors for not upholding the contractual restrictions.</p> / Doctor of Philosophy (PhD)

由於會計資訊與企業存有緊密之關聯性，再加上企業外部的報表使用者屬於相對資訊弱勢者，企業之管理當局因此存有許多不同動機及機會進行盈餘管理。會計師受託查核公司財務報表並對報表表示意見，在健全資本市場的任務中擔任極為重要的角色，社會大眾對會計師之職責賦予相當大的期待。但繼美國安隆案後，各國財務報導相關弊案連續爆發卻使會計師的專業遭受嚴重質疑，因此，弊案爆發或會計師受主管機關懲處後，先前被懲處會計師所簽證之其他受查公司，不論有無類似弊病，都會被人以放大鏡來觀察。然而，究竟會計師對於實質盈餘管理之抑制效果是否得以發揮？會計師懲戒制度實施結果是否合乎立法初衷而得以督促提升報表之盈餘品質？則尚無一致結論，亦為本研究欲探討的議題。 / Grahem et al.（2005），Roychowdhury（2006）及Cohen et al.（2008）等文獻均認為沙氏法頒布後，公司管理階層用以操縱盈餘之行為，從過去進行應計項目盈餘管理，改為偵察度較困難、法律上可非難性較低之實質盈餘管理。本研究即參考Roychowdhury之研究，以異常裁決性費用、異常生產成本、異常營運活動現金流量之絕對值捕捉實質盈餘管理程度，依據欲探討之問題設定兩大研究假說，以獨立樣本觀察懲戒會計師事件發生前後期實質盈餘管理之變化，探討懲戒會計師制度對於實質盈餘管理之影響。研究結果發現，以異常裁決性費用與異常生產成本衡量實質盈餘管理之程度時，受懲戒會計師之客戶在經查核後之財務報表中，報導實質盈餘管理之程度更為嚴重；以異常營運活動現金流量為實質盈餘管理之代理變數，則因受干擾影響而無法在各假說下得出顯著之結果。 / 因會計師之查核關卡對於實質盈餘管理之抑制效果有限，目前企業報表中所報導數據之解讀，有賴報表使用者多予比較各科目前、後期波動，考量各數值之間之關連性，並推敲公司可能使用之盈餘管理行為以及相關企業風險。懲戒制度之目的在於避免專業人士怠忽其職、違規行事而侵害大眾利益，其不僅處分已違法之會計師，對於其他會計師亦有警惕之意味，因此實有其存在之必要，本研究結果建議主管機關參考相關研究，制訂更為完善的制度以增進大眾利益，符合社會期待。 / Since accounting information is instrumental to many decisions that a company and its stakeholders make, management has plenty of motives to manage earnings reported on the financial statements. The users will probably as a result misinterpret the data, and thus, sustain direct or indirect losses. Accountants are asked to express their opinions toward the financial reports, and have played an important role in the capital market. Investors rely on what accountants assure in their audit to make decisions. However, after the Enron scandal broke out, so many frauds erupted that accountants’ professionalism and assurance quality were being questioned. Sanctions may be due to the profession’s self-regulation system or based on judgment of the regulators. Nevertheless, does the CPA sanction system actually restrain the real earnings management behavior of auditee companies? Can the system really enhance the earnings quality of client accounting information? The answers to these questions are unknown, and they are the subject of this study. / Managers have altered their application to manage earnings from accruals to real activities since the issuance of Sarbanes-Oxley Act. Based upon the research model developed by Roychowdhury (2006), this study uses abnormal discretionary expenses, abnormal production, and abnormal operating cash flow as proxies for earnings management. I classify samples into two periods, i.e., before and after changing accountants to analyze whether the sanction has affected the application of real earnings management. The results do not support that the auditor sanction system in Taiwan is effective in reducing the real earnings management behavior of auditee firms. / In short, one purpose of CPA sanction is to enforce professional conduct on all members of the profession. It not only punishes the accountants that break laws, but also alerts other fellow auditors. Therefore, the sanction system is necessary. The regulators should refer to research findings and examine the effect of the sanction system on real earnings management. In the mean time, it is advisable that statements users put more emphasis on analyzing and comparing the fluctuations of the figures and ratios between periods. After all, reading carefully through financial statements and numbers is the ultimate way to stop real earnings management.

本研究旨在探討家族企業及非家族企業兩種不同的公司治理型態，其董事會各組成區塊與企業進行實質盈餘管理之間的關聯性。實質盈餘管理係以異常營運活動現金流量、異常生產成本及異常裁決性費用為衡量指標，並以2004年至2011年間我國初次上市櫃(IPO)的電子產業為樣本範圍。 實證結果發現，在家族企業中：(1)最終控制者控制席次過半及經理人董事席次比率愈高，愈可顯著抑制企業進行實質盈餘管理。(2)外部董事席次比率愈高，對企業進行實質盈餘管理有反向助長之傾向。(3)獨立董事席次愈多，愈能顯著監督企業進行實質盈餘管理，唯在企業以裁決性支出方式操弄盈餘方面較無監督能力。在非家族企業中：(1)最終控制者控制席次過半及外部董事席次比率的增加，對抑制企業從事實質盈餘管理無顯著效果。(2)獨立董事席次的增加可顯著抑制企業操弄盈餘。(3)經理人董事席次比率愈高，愈顯著助長企業進行實質盈餘管理。 / This thesis aims to discuss the relationship between board composition and real earnings management (hereafter, REM) under family business and non-family business. This study uses abnormal cash flow from operations, abnormal production costs, and abnormal discretionary expenses as a measure of real earnings management. Data is collected from electronics industry in Taiwan which applied for Initial Public Offerings (IPO) from 2004 to 2011. The empirical results show that in family business: (1) If the ratio of board seat-control of ultimate controller is over 50 percents, or the ratio of board seats of manager is higher, it is helpful to restrain firms from manipulating earnings by REM.(2) Once the ratio of board seats of outside directors is higher, it is prone to promote firms to do REM.(3) Once the board seats of independent directors are more, it is significant to reduce the degree of REM. However, they seem to have no abilities to restrain firms from manipulating earnings by varying discretionary expenses. In non-family business: (1) The board seat-control of ultimate controller over 50 has nothing to do with decreasing the degree of REM. Also,the increase of the ratio of board seats of outside directors is not significantly to suppress the degree of REM. (2)The increase of board seats of independent directors is effectively to reduce the extent of REM. (3) If the ratio of board seats of manager is higher, it will push firms to manipulate earnings by REM.

No description available.

The financial difficulties following the Covid-19 pandemic have been many. Typically in situations of financial distress, firms are incentivized to utilize earnings management techniques to alter the picture of their financial situation, due to market-based pressure. However, studies have shown that in times of crisis, institutional and macroeconomic factors may be more influential as increased scrutiny and an acceptance of abnormal results may make it less attractive to engage in such practices. The purpose of this study is to explore the impact of the Covid-19 pandemic on the use of earnings management with a sample of 942 firms, amounting to 5 652 firm-year observations between the years of 2015-2020. The results show a statistically significant increased amount of income-decreasing accrual-based earnings management, indicating the use of “big bath” accounting. This suggests that managers were incentivized to utilize earnings management techniques in an attempt to present boosted earnings to the market in future periods, by exploiting the pandemic and reporting worse than necessary numbers. However, the study does not find any significant changes in the use of real earnings management, which could be due to managerial limitations in making operational decisions during severe financial distress.

Världen drabbades av ett smittsamt virus i slutet på 2019 som växte till en global pandemi med namnet coronapandemin. Pandemin har orsakat stora förluster för företagen genom restriktioner, försämrade leveranskedjor och nedstängningar. Forskare konstaterat ett samband mellan krissituationer och resultatmanipulering.  Syftet med denna studie är att undersöka om coronapandemin har påverkat resultatmanipuleringen i svenska noterade bolag. Tre modeller som mäter resultatmanipulering tillämpas på ett urval om 356 svenska noterade bolag och 2136 årsobservationer mellan 2016–2021. Resultatmanipulering före coronapandemin (2017–2019) jämförs med resultatmanipulering under coronapandemin (2020–2021) för att se om det föreligger signifikant skillnad mellan perioderna. Efter utförda tester visar det sig att företag tillämpar mer resultatmanipulering genom periodiseringar och inte genom aktiva val. Specifikt handlar det om resultatmaniskande periodiseringar som möjliggör för företagen att redovisa lägre resultat under pandemiperioden. Detta görs för att företagen ska kunna redovisa oförväntad återhämtning efter pandemiperioden med starkare resultat och kallas för big bath strategin. / The world was affected by a contagious virus at the end of 2019 that grew into a global pandemic with the name corona pandemic. The pandemic caused big loses for firms through restrictions, worsened supply chain and shutdowns. Researchers have established a relation between times of crisis and earnings management. The purpose of this study is to investigate if the corona pandemic affected earnings management in Swedish listed companies. Three models that measure earnings management are employed on a sample of 356 Swedish listed firms with 2136-year observations. Earnings management before the pandemic (2017-2019) is compared with Earnings management during the pandemic (2020-2021) to see whether there is a significant difference between the periods.  After the tests are done it is found that firms engage in more earnings management through accruals and not real earnings management. Specifically, income decreasing accruals that enable firms to report lower earnings during the pandemic. This is done so that firms can report unexpected recovery after the pandemic period through stronger earnings and is called big bath strategy.