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Yes / This study develops a 'comply or explain' index which captures compliance and quality of explanations given for non-compliance with the corporate governance codes in UK and Germany. In particular, we explain, how compliance and quality of explanations provided in non-compliance disclosures, and various other internal corporate governance mechanisms, affect the market valuation of firms in the two countries. A dynamic generalised method of moments (GMM) estimator is employed as the research technique for our analysis, which enabled us to control for the potential effects of endogeneity in our models. The findings of our content analysis suggest that firms exhibit significant differences in compliance, board independence and ownership structure in both countries. The 'comply or explain' index is positively associated with the market valuation of UK firms suggesting that compliance and quality governance disclosure is value relevant in the UK. Institutional blockholders' ownership is however, negatively associated with the market value of firms, which raises questions about the monitoring role of institutional shareholders in both countries. We argue that both compliance and explanations given for non-compliance are equally important, as long as valid reasons and justifications for non-compliance are provided by the reporting companies. These findings thus imply that the 'comply or explain' principle is working well and that UK and German companies could benefit from the flexibility offered by this principle. With respect to the role of board size, board independence, ownership structure, and institutional ownership of firms, this study offers policy implications.

The annual report works as a source of information and basis for decision making for investors where disclosure quality varies between different companies. There is an inherent problem in a conflict of interest between the principal and agent where disclosure quality might suffer because of hidden negative information in ambiguous reasoning. Lower disclosure quality contributes to the annual report not pertaining a fair economic picture which leads to an information gap between companies and investors. The note section in the annual report is eminently important to be able to provide a correct economic analysis to the market. Through measurements of disclosure quality in the note section of the annual report with the help of Fogindex where readability is determined, this study explores the correlation between disclosure quality and misvaluation of the companies’ stocks. Additionally, the study examines if the correlation is strengthened splitting the companies into divisions based on competition of an industry. The result of the study indicates a negative correlation between disclosure quality and misvalution av company stocks. The study cannot indicate that the correlation is strengthened when competition is taken into consideration. The study has been written in Swedish. / Årsredovisningen fungerar som en informationskälla och beslutsunderlag för investerare där upplysningskvaliteten varierar mellan olika företag. Det råder ett inneboende problem i en intressekonflikt mellan principalen och agenten där upplysningskvaliteten kan bli lidande på grund av att negativ information döljs i tvetydiga resonemang. Lägre upplysningskvalitet bidrar till att årsredovisningen inte längre återger en rättvisande ekonomisk bild vilket leder till ett informationsgap mellan företag och investerare. Notavsnittet i årsredovisningen är synnerligen viktig för att kunna ge marknaden en korrekt ekonomisk analys.  Genom att mäta upplysningskvalitet i notavsnittet i årsredovisningen med hjälp av Fogindex där läsvänligheten bestäms, utforskar den här studien sambandet mellan upplysningskvalitet och felvärdering av företagens aktier. Dessutom undersöks det om sambandet förstärks vid uppdelning av bolagen baserat på branschkonkurrens.  Studiens resultat påvisar ett negativt samband mellan upplysningskvalitet och felvärdering av företagens aktier. Studien kan inte visa på att sambandet förstärks när hänsyn till konkurrens tas. Uppsatsen har skrivits på svenska.

Since 2005, publicly traded European companies are required to prepare their consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). This is the result of the so-called “IAS-Regulation” of the European Parliament and of the European Council (Regulation (EC) No. 1606/2002) which formulates two objectives directly related to financial reporting: (higher) comparability and transparency of financial statements. With regard to transparency, researchers often rely on proxies to measure the quality of financial statements. In this dissertation, I follow this approach and examine the quality of IFRS financial statements relying on different proxies, such as value relevance, the degree of earnings management, and disclosure quality. The four papers in this dissertation cover research questions related to the determinants and consequences of managerial discretion in the three most important components of financial statements: the balance sheet, the income statement, and the notes. In summary, this dissertation answers important questions concerning the quality of accounting under IFRS which have remained unanswered – and in some cases even unasked – until now. Therefore, this dissertation has a material impact on the understanding of accounting quality under IFRS.

Trots redovisningens huvudsakliga syfte att bistå som informationskälla och beslutsunderlag varierar kvaliteten för upplysningar mellan olika företag. IASB:s regelverk lämnar ett stort utrymme för tolkning, vilket leder till att upplysningar till viss grad genomsyras av de problem relationen mellan en principal och en agent kan ge upphov till. Det kan resultera i en redovisning som inte längre återger en ekonomiskt rättvisande bild av verksamheten, vilket bidrar till ett informationsgap mellan företag och dess intressenter. Denna studie bidrar till att reducera negativa marknadseffekter till följd av gapet, genom en granskning av ett slumpmässigt urval om 249 svenska börsnoterade företag och dess upplysningar vid byte av redovisningsprincip för operationella leasingavtal. IFRS 16- Leasingavtal kräver att merparten av alla leasingavtal tas upp i företagets balansräkning som en nyttjanderättstillgång, respektive leasingskuld. Det empiriska material som studien baseras på lyckas förklara en del av variationen i upplysningskvalitet mellan företag, genom den effekt kapitaliseringen av avtalen bidrar till vid förändringen av redovisningsprincip. / Despite the main purpose of accounting as source for information and support in investment decisions, the quality of disclosure differs between companies. The accounting standards developed by IASB leaves room for interpretation, which may lead to disclosures permeated by the relationship between principals and agents, resulting in an information gap between the company and its stakeholders. This study contributes to a reduced market influence caused by this gap, by reviewing the disclosures of 249 Swedish listed companies when changing principles of accounting for operating leases. IFRS 16- Leases requires a capitalization of the lease contract as an asset and debt respectively in the balance sheet. The empirical data of the study succeeds to explain some of the variance in disclosure quality between companies, during a transitional period, by the effect of capitalizing when changing principle.

Since 2005, publicly traded European companies are required to prepare their consolidated financial statements in accordance with International Financial Reporting Standards (IFRS). This is the result of the so-called “IAS-Regulation” of the European Parliament and of the European Council (Regulation (EC) No. 1606/2002) which formulates two objectives directly related to financial reporting: (higher) comparability and transparency of financial statements. With regard to transparency, researchers often rely on proxies to measure the quality of financial statements. In this dissertation, I follow this approach and examine the quality of IFRS financial statements relying on different proxies, such as value relevance, the degree of earnings management, and disclosure quality. The four papers in this dissertation cover research questions related to the determinants and consequences of managerial discretion in the three most important components of financial statements: the balance sheet, the income statement, and the notes. In summary, this dissertation answers important questions concerning the quality of accounting under IFRS which have remained unanswered – and in some cases even unasked – until now. Therefore, this dissertation has a material impact on the understanding of accounting quality under IFRS.:1 Accounting Quality under IFRS – Essays on Value Relevance, Earnings Management and Disclosure Quality: An Overview … 1 1.1 Introduction … 2 1.2 Overview of the Manuscripts … 4 1.3 Principal Research Contributions … 13 References … 16 2 Discretion in the Accounting for Defined Benefit Obligations - An Empirical Analysis of German IFRS Statements … 19 2.1 Introduction … 21 2.2 Literature Review … 25 2.3 Research Approach … 29 2.4 Results … 38 2.5 Conclusion … 45 References … 54 3 The Association between Corporate Social Responsibility (CSR) and Earnings Quality - Evidence from European Blue Chips … 59 3.1 Introduction … 61 3.2 Literature Review and Hypothesis Development … 63 3.3 Research Design … 70 3.4 Results … 79 3.5 Conclusion … 88 References … 101 4 Reexamining OCI Pricing - Empirical Analysis of Reporting Location Changes due to IAS 1 (rev. 2007) … 105 4.1 Introduction and Background … 107 4.2 Literature Review … 111 4.3 Research Approach and Hypotheses Development ...114 4.4 Results … 121 4.5 Conclusion … 130 References … 150 5 Short-term and Long-term Effects of IFRS Adoption on Disclosure Quality and Earnings Management … 155 5.1 Introduction … 157 5.2 Institutional Background: The Development of the German Accounting Environment … 161 5.3 Related Literature and Hypotheses Development … 164 5.4 Research Design … 175 5.5 Results … 186 5.6 Conclusion … 195 References … 209

This dissertation documents the quality of financial accounting information in a transition economy, the Czech Republic. High quality accounting information decreases the risks for investors, promotes investment activities and increases the ability of companies to raise funds at a reasonable cost of capital. Countries with high quality accounting information have a comparative advantage in attracting financial capital. Transition economies - i.e. countries switching from centrally planned to market economies - are typically in need of capital. Therefore a new accounting regulation had to be developed that would satisfy the needs of new private investors. The quality of financial accounting information depends on accounting quality (an outcome of applied accounting principles) and disclosure quality (an outcome of the amount and characteristics of information provided in the financial statements). Accounting quality is measured as the value relevance of accounting numbers and certain attributes of earnings which promote the value relevance. Disclosure quality is measured in terms of mandatory disclosure requirements, actual disclosures of companies (i.e. the level of compliance with legislation) and additional information provided voluntarily by the companies. Sweden is used as a benchmark for well-developed market economy and the quality of financial accounting information in the Czech Republic is systematically compared to the quality of Swedish financial accounting information throughout the dissertation. The results show that both accounting and disclosure quality in the Czech Republic were inferior in the beginning of the transition period. Over time, the value relevance of accounting numbers has however improved. The change in the value relevance may be attributed in particular to improvements in disclosure quality. The key factors behind the development were improved accounting legislation and control mechanisms, accompanied by changes in the business climate including higher sophistication of both the producers and users of the financial information. / Diss. Stockholm : Handelshögskolan, 2009