Earnings Management pre- and post IFRS Adoption : Results from Sweden, Finland and Norway

Sammanfattning: This paper examines the behaviour and use of accruals management (AM) and real activities manipulation (RAM) under local Generally Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS) and if it has been altered following IFRS implementation in Sweden, Finland and Norway. The paper takes inspiration from Roychowdhury (2006) and Zang (2012) and use previously developed frameworks for earnings management. It provides empirical results with data from 1997 to 2016, focusing on companies around zero earnings and zero earnings growth. The results are mixed where the use of RAM through production suggests increased earnings manipulation. RAM, through discretionary expenditures, on the other hand are positive, which suggests that companies do not engage in these activities. The results regarding AM suggest downward adjustments. However, neither discretionary expenditures nor AM have a significant change following IFRS implementation. Overall, earnings management behavior in the sample appears to be limited. Although, increased RAM has been found regarding production costs, which suggest adjustments following IFRS adoption. Lastly the paper finds that studying one type of earnings management behavior, as often previously done in research, is insufficient in order to fully estimate earnings management.