Esse Non Videri

Sammanfattning

Title: Esse Non Videri: Does sphere ownership influence the level of earnings management in Swedish firms? Course: BUSN79 Degree Project Accounting & Finance Authors: Erik Arnell and Jakob Skåring Supervisor: Reda Moursli Key words: Sphere ownership, corporate ownership, earnings management, accrual based earnings management Purpose and research question: The purpose of this study is to investigate if earnings management is influenced by sphere control in a general sense, as well as family sphere and non-family sphere control. We therefore ask the following research question: Does sphere ownership influence the level of earnings management in Swedish firms? Methodology: We are addressing our research question empirically by estimating Pooled Ordinary Least Squares (POLS) and random effect regressions, using robust standard errors clustered by firm. The absolute values of discretionary accruals estimated with the Modified Jones Model are set as the dependent variable. Furthermore the models control for variables found to have an effect on earnings management as well as industry and year effects. Findings are subject to a battery of robustness checks. Theoretical perspectives: The theoretical perspectives used to develop our hypothesis and contextualise our findings are agency theory - extended with the entrenchment and alignment effect, stewardship theory and socioemotional wealth theory. Empirical foundation: The study uses a final sample of 1,704 firm-year observations of 243 firms listed on the Stockholm Stock Exchange (SSE Nasdaq OMX) over the time period 2010-2020. Conclusions: We do not find sufficient evidence of controlling sphere ownership influencing the degree of earnings management in Swedish firms. However, we do find that family sphere controlled firms are associated with lower levels of earnings management than other firms.