Can managers use discretionary accruals to ease financial constraints prior to investment?

Sammanfattning: In this thesis, we study the effects of financial constraints on financial reporting behavior by investigating whether discretionary accruals can signal good investment opportunities and enable access to external financing for financially constrained firms. We study a panel of firms listed on the Swedish main market between 2007-2015 and use established models for estimating discretionary accruals and investment opportunities. We find no conclusive evidence of there being differences in the use of discretionary accruals between financially constrained firms and their unconstrained counterparts. Using several measures of financial constraints, we do not find any evidence of discretionary accruals having a positive relationship with either investment or external financing for financially constrained firms with positive investment opportunities.