Managing the fair value of investment property : Empirical evidence of earnings management in Swedish Real Estate

Sammanfattning: This study poses two questions relating to earnings management with the intent to mislead the market for the firms equity and debt. A multiple regression model is used to test two hypoteses through 7 hypothesized determinants of discretionary accruals and 3 control variables. A sample of Swedish real estate firms, including only the years when the firms are both quoted and have disclosed discretionary revaluations of their real estate properties is analyzed. Evidence is found of earnings management with the intent of misleading the stock market but no such evidence is found of earnings management with the intent of misleading the market for corporate debt. The implications of the findings are discussed and the direct and indirect harm of earnings management is specified.