Institutional investors and earningsmanagement : A study of Swedish listed firms

Sammanfattning

This thesis examines the association between institutional ownership and earnings management among Swedish non-financial firms on Nasdaq Stockholm, distinguishing between total, domestic, and foreign institutional ownership. Drawing on agency theory, the thesis focuses on accrual-based earnings management proxied by discretionary accruals. The results are based on an unbalanced panel of 2,437 firm-year observations between 2015–2024 and pooled OLS regressions with year and industry fixed effects. Additional sub-sample analyses examine whether the association differs between firms with high and low growth opportunities. The baseline findings show a negative and statistically significant association between total institutional ownership and earnings management. When considering investor domicile, domestic institutional ownership is negatively and significantly associated with earnings management, while foreign institutional ownership is negative but insignificant. The negative associations appear more pronounced among high-growth firms than among low-growth firms, although coefficient equality tests do not provide conclusive evidence of growth-opportunity differences. Several robustness tests and alternative earnings management proxies indicate that the main results remain broadly robust, while suggesting some sensitivity to methodological choices, especially for foreign institutional ownership and growth-opportunity differences. Overall, the findings support the monitoring view of institutional investors, particularly for domestic institutional investors in the Swedish setting.