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Despite countless efforts to elucidate market participants" understanding of the implications of earnings quality, empirical accounting research has rendered two distinct perspectives. The first perspective considers market participants naïve users of accounting information who fail to grasp the implications of earnings quality resulting in temporary security mispricing. The second perspective suggests that market participants scrutinize earnings reports carefully and subsequently discern and price the quality of earnings. The purpose of my research is to help clarify the ambiguity surrounding market participants" pricing of earnings quality using one clearly observable indicator of low-quality earnings, accounting restatements. This study examines the effect pre-restatement earnings quality has on short-window returns and analyst forecast revisions and dispersion following restatement announcements using a cross-section of 719 publicly traded firms that announced restatements between 1997 and 2004. Accrual and book-tax difference metrics are used to proxy for earnings quality. The metrics are examined separately and collectively to ascertain their individual and incremental effects in modeling the market reaction. Further analyses investigate the effects that various levels of investor sophistication have on the market reaction. Results indicate that the market reaction to restatement announcements is significantly influenced by pre-restatement earnings quality. Specifically, both the accrual and book-tax difference measures of earnings quality are significantly and negatively related to the market reaction. Further analysis indicates the predictive power of the model is improved by including both the accrual and book-tax difference proxies. This finding suggests the information in book-tax differences may provide market participants with signals from which to assess earnings quality that are distinct from those contained in accruals. Basic results for analyst forecast dispersion and revisions are not conclusive. Results of the interactions between each earnings quality proxy and level of investor sophistication are significant only for the accrual based measure of earnings quality. This suggests that sophisticated investors are more attuned to the implication of accrual based measures of earnings quality than book-tax difference measures. / Ph. D.

The paper empirically tests the relationship between earnings volatility and cost of debt with a sample of more than 77,000 Swedish limited companies over the period 2006 to 2013 observing more than 677,000 firm years. As called upon by many researchers recently that there is very limited evidence of the association between earnings volatility and cost of debt this paper contributes greatly to the existing literature of earnings quality and debt contracts, especially on the consequence of earnings quality in the debt market. Earnings volatility is a proxy used for earnings quality while cost of debt is a component of debt contract. After controlling for firms’ profitability, liquidity, solvency, cashflow volatility, accruals volatility, sales volatility, business risk, financial risk and size this paper studies the effect of earnings volatility measured by standard deviation of Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) on Cost of Debt. Overall finding suggests that lenders in Sweden does take earnings volatility into consideration while determining cost of debt for borrowers. But a deeper analysis of various industries suggest earnings volatility is not consistently used by lenders across all the industries. Lenders in Sweden are rather more sensitive to borrowers’ financial risk across all the industries. It may also be stated that larger borrowers tend to secure loans at a lower interest rate, the results are consistent with majority of the industries. Swedish debt market appears to be well prepared for financial crises as the debt crisis seems to have no or little adverse effect borrowers’ cost of capital. This study is the only empirical evidence to study the association between earnings volatility and cost of debt. Prior indirect research suggests earnings volatility has a negative effect on cost debt (i.e. an increase in earnings volatility will increase firm’s cost of debt). Our direct evidence from the Swedish debt market is consistent for some industries including media, real estate activities, transportation & warehousing, and other consumer services.

This paper investigates the European CDS markets response to earnings announcements between the years 2011-2013. Through the use of event study methodology, we investigate if the CDS market reacts to earnings news in terms of abnormal spread changes. Furthermore, by exploring the pre- and post announcement window the study examines the efficiency of the CDS market. The results imply that earnings announcements provide valuable information to the CDS market, with statistically significant results on the 5 % and 10 % significant level for negative and positive news respectively. Additionally, the paper shows that the market has a rather symmetric reaction to negative and positive earnings news since there is no significant difference in effects. The paper further reveals that there is no significant difference in the response between different credit rating groups. In terms of market efficiency, the study cannot confirm that there is anticipation for earnings announcements. The study further shows that there is no post-earnings announcement drift in the CDS market and that the market, overall, is efficient in incorporating the information into the spreads. Finally, a cross-sectional regression analysis confirms that negative earnings surprises are linked to large announcement day reactions, while positive earnings surprises are not.

This paper looks at the difference in disclosure requirements between the foreign earnings that companies plan to repatriate back to the United States and those that companies plan to permanently reinvest abroad. The concepts of transparency and compliance are addressed as issues related to the current disclosure requirements surrounding permanently reinvested earnings and the associated unrecognized deferred tax liability. The resulting implications on investors as well as the effects of tax holidays will also be discussed. Overall, this paper aims to prove the need for modification of the current disclosure requirements regarding foreign earnings labeled as permanently reinvested earnings as well as stricter regulation of these requirements in order to increase company compliance.

Syfte: CSR är ett högaktuellt och viktigt ämne för företagen och deras intressenter. Då högre CSR- aktiviteter anses vara relaterat till etiskt agerande företagsledningar undersöker studien om företagens ledningar utnyttjar detta i försök att dölja omoraliska aktiviteter i form av earnings management. En opportunistiskt agerande företagsledning använder earnings management för att manipulera resultatet i önskad riktning, vilket kan göras genom diskretionära periodiseringar (AEM) eller via aktiviteter som påverkar kassaflödet (REM). Eftersom dessa fungerar som substitut så undersöks båda i studien. Studien baseras på kontinentaleuropeiska bolag där rättstillämpningen bygger på civil law. Dessa företag redovisar enligt IFRS och CSR-rapporterar efter GRI, vilket tidigare forskning pekat ut som faktorer som påverkar sambandet mellan CSR och earnings management. Syftet med studien är därför att undersöka om CSR används som ett medel för att dölja förekomsten av earnings management, samt om det finns stöd för ett opportunistiskt alternativt etiskt perspektiv. Metod: Studien har en kvantitativ forskningsmetod och tillämpar en positivistisk forskningsfilosofi med en hypotetisk-deduktiv ansats. Studien använder en tvärsnittsdesign med sekundärdata från kontinentaleuropeiska bolag över en tioårsperiod (2008-2017). Datan har hämtats från Thomson Reuters Datastream och analyserats i IBM SPSS. Resultat & slutsats: Resultaten indikerar att kontinentaleuropeiska företag agerar opportunistiskt och möjligtvis använder CSR i försök att dölja earnings management. Detta kan dock endast härledas till REM-aktiviteterna abnorma kassaflöden och abnorma produktionskostnader. Mellan CSR och AEM kunde inget samband redogöras. Därav dras slutsatsen att det är viktigt att earnings management studeras utifrån båda aspekterna för att erhålla ett rättvisande resultat. Examensarbetets bidrag: Studien bidrar till att fylla forskningsgapet gällande sambandet mellan CSR och earnings management i form av både AEM och REM. Resultaten är viktiga för företagens intressenter då de tyder på att högre CSR-engagemang inte är relaterat till mer etiskt agerande företagsledningar. Intressenterna bör främst vara vaksamma på aktiviteter som inte granskas av revisorer då dessa visats förekomma i högst utsträckning. Förslag till fortsatt forskning: I framtida studier kan sambandet mellan CSR och earnings management undersökas i företag där incitament till resultatmanipulation anses föreligga. Vidare kan ledningens syn på earnings management studeras mer ingående. Förslag ges även till att undersöka branschskillnader och att använda alternativa CSR-mått. / Aim: CSR is a highly topical and important subject for the companies and their stakeholders. Since higher CSR activities are considered to be related to ethically acting managements, this study investigates whether the management uses CSR as an attempt to conceal immoral activities in terms of earnings management. An opportunistic acting management uses earnings management to manipulate the result in the desired direction, which can be done through discretionary accruals (AEM) or through activities that affect the company’s cash flow (REM). Since these operates as substitutes, both are examined in the study. The study is based on Continental European companies where the application of law is based on civil law. These companies report according to IFRS and CSR reports according to GRI, which previous research pointed out as factors to affect the correlation between CSR and earnings management. The purpose of the study is therefore to investigate whether CSR is used as a means of concealing the existence of earnings management, and whether there is support for an opportunistic alternative ethical perspective. Method: The study has a quantitative research method and applies a positivistic research philosophy with a hypothetical-deductive approach. The study uses a cross-sectional design with secondary data from Continental European companies over a ten-year period (2008-2017). The data has been retrieved from Thomson Reuters Datastream and analyzed in IBM SPSS. Result & Conclusions: The results indicate that Continental European companies act opportunistically and uses CSR in attempts to hide earnings management. However, this can only be attributed to the REM activities abnormal cash flows and abnormal production costs. No relationship could be reported between CSR and AEM. Hence, it is concluded that it is important to study earnings management on the basis of both aspects to report fair results Contribution of the thesis: The study contributes to filling the research gap regarding the relationship between CSR and earnings management in both AEM and REM. The results are important for companies' stakeholders as they indicate that higher CSR involvement is not related to more ethical behavior of the company management. Stakeholders should primarily be vigilant on activities that are not audited by auditors as these have been shown to occur to the greatest extent. Suggestions for future research: In future studies, the relationship between CSR and earnings management can be investigated in companies where incentives for manipulation the financial performance are considered to exist. Furthermore, the management’s view of earnings management can be studied more thoroughly. Suggestions are also made to investigate industry differences and to use alternative CSR measures.

Les opérations de fusions et acquisitions constituent un élément central de l’économie de marché et parallèlement forment l’un des principaux vecteurs de la dynamique de nos structures industrielles. Notre thèse vise à apprécier de façon objective et scientifique l’impact des opérations de fusions et d’acquisitions sur la qualité de l’information comptable produite par les entreprises. Compte tenu de son importance pour les acteurs économiques, la qualité de l’information comptable est d’abord comprise comme la qualité des résultats publiés par l’entreprise. Trois principaux axes sont dégagés au sein de cette problématique, qui constitue les trois principaux chapitres de notre thèse. Notre travail s’appuie sur une base de données regroupant les opérations des fusions et acquisitions entre les entreprises cotées sur le marché américain de l’année 1986 à l’année 2013. Les principes de ces chapitres sont les suivantes. Nous montrons tout d’abord que les entreprises impliquées dans les opérations payées par une combinaison de titres et de liquidités, opération ayant connues un fort développement, ont un comportement en manière de gestion de résultat proche des entreprises payant uniquement en titres, et à ce jour seules documentées. Nous établissons ensuite que la gestion de résultat de ces entreprises ne se réduit pas à la seule gestion des compte d’”accruals ". Nous montrons que les entreprises mobilisent également d’autre techniques, soit des méthodes purement comptables au travers par rendre de choix de classification des items, soit des méthodes ayant un impact sur les conditions réelles d’exploitation, au travers par exemple de l’ajustement des dépenses de R&D. Des liens de substitution / complémentarité entre ces différentes formes de gestion des résultats sont mise à jour, et mise en perspective des choix de méthodes de paiement des opérations. L’impact de la gestion des résultats sur la performance des acquéreurs est également analysé. Nous établissons en particuliers que si un degré modéré de gestion des résultats pourrait avoir des conséquences positives en manière de la performance, un comportement agressif en matière de gestion des résultats conduisant à reconnaitre un impact négatif sur la performance. Cela étant, il semble que la richesse des actionnaires ne soit affectée que très marginalement par ces choix de gestion des résultats, ceci autant à court terme que à long terme. / The Merger and Acquisition (M&A) operations constitute a key element of market economy and meanwhile form one of the main vectors of the dynamics of the industrial structures. This thesis aims at analyzing the impact of M&A operations on acquiring firm’s accounting information quality. The accounting information quality shall be interpreted first of all, as the quality of earnings. Three main axes are emerged in this problematic and constitute three main chapters of this thesis. By observing all public M&A transactions on the U.S. market from the year 1986 to 2013, these three chapters provide following main contributions. First we find the acquiring firms that involved in the mixed payment acquisition have undergone notable development, have earnings management (EM) behaviors around acquisition years. However, prior study only documented a certain kind of behaviors of the 100% stock exchange acquirers. Plus, we indicate that the EM behavior of acquiring firm is not constraint to the accruals management (AM). We show that they are also likely to use many other ways, either accounting treatment through classification shifting, or real earnings management (REM) methods, for example through the budgetary adjustment of the R&D expenditures. A close link is found between the choice of EM methods and acquisition payment method. Moreover, a substitution / complementary effect is also noted between different forms of EM methods. The impact of these EM strategies on acquiring firm’s performance is also analyzed. A moderate way of EM has positive impact on future operating performance while a high degree of these EM behaviors bring a negative impact. Nonetheless, it seems that the shareholders' wealth is only marginally affected by the choice of EM methods, in the short term as well as the long term.

Earnings management är ett fenomen som enligt studier har ökat i omfattning under senare tid tack vare förändringar av redovisningsprinciper. Detta har gett företag möjligheten att med ökad subjektivitet bedöma värdet på sina tillgångar, vilket kan utnyttjas för att manipulera redovisning och justera resultat i önskad riktning. Den här studien syftar primärt till att undersöka om det finns ett samband mellan variablerna earnings management och pressade resultat bland de noterade bolagen på Nasdaq OMX Stockholm, även kallad “Stockholmsbörsen”. Det sekundära syftet är att undersöka om detta eventuella samband är vanligare förekommande bland mindre företag samt om någon bransch är överrepresenterad. En kvantitativ metod har använts där data från bolagens årsredovisningar har hämtats och sedan granskats. Efter det har en analytisk generalisering gjorts av resultaten som visar på att företag i större utsträckning tenderar att bedriva earnings management under perioder där de upplever pressade resultat, i motsats till perioder där de upplever normala resultat. Studien visar också att detta inte är vanligare förekommande på någon speciell börslista eller inom någon specifik bransch, utan att företagen är representerade i likvärdig utsträckning. I studien visade det sig att ett vanligt verktyg för att bedriva earnings management är att göra stora engångsnedskrivningar av goodwill. Detta möjliggjordes år 2005 då IFRS 13 infördes i EU, vilket resulterade i att goodwillposten årligen nedskrivningsprövas istället för att som tidigare avskrivas planmässigt. En kritisk diskussion förs med slutsatsen att resultaten är delvis applicerbara på den studerade populationen och säger något om närliggande fall. Slutligen diskuteras studiens bidrag där konklusionen är att resultaten adderar till samt stärker tidigare forskning. / Earnings management is a phenomenon whose scope of usage has expanded in recent time due to changes in accounting principles, according to studies. These changes have given companies the possibility to use subjective judgment to a higher degree when valuing their assets. This can be utilized to manipulate accounts and tweak results in desired direction. The purpose of this study is primarily to investigate if there is a connection between the variables earnings management and pressured results among the listed companies on Nasdaq OMX Stockholm, also knowned as “Stockholmsbörsen”. The secondary purpose is to investigate if this possible connection is more common among smaller companies and if there is any industry that is overrepresented. A quantitative method has been used where data has been collected from the companies’ websites and later reviewed. An analytic generalization has then been applied on the results that show that companies tend to engage in earnings management in greater magnitude when they are experiencing times with pressured results, in contrary to when they experience times with normal results. The study also shows that it’s not more commonly practiced on any particular stock market list or in some particular industry. The companies are rather equivalently represented along the scope of industries and stock market lists. The study shows that a common tool to engage in earnings management is to make big one time impairments of goodwill. This was made possible 2005 when IFRS 13 was implemented in the EU, which resulted in that the goodwill account where to be impairment tested every year instead of the former principle that used linear depreciation. A critical discussion is held with the conclusion that the results of the study are partly applicable on the studied population and says something about nearby cases. Finally there is a discussion about the contribution of the study with the conclusion that the findings adds something to and strengthens past findings.