The Effect of Private Equity Ownership: A Study on Earnings Management in Connection to Nordic IPOs

Sammanfattning

This study researches if there is any difference in earnings management between private equity (PE) and non-PE backed firms in connection to initial public offerings (IPOs). The sample consists of firms that were listed on Nordic stock exchanges between 2014 and 2018, and differences between the two groups are tested for during the IPO year and the year prior to the IPO. The results indicate that there is a tendency that PE backed firms upwards adjust earnings to a lesser extent than non-PE backed firms. This points in the direction of our hypothesis, which is that PE backed firms upwards adjust to a lesser extent due to tighter monitoring and more sophisticated ownership. However, the results are in most cases not statistically significant, implying that we not are able to draw any significant conclusions. Rather, the results indicate that are other factors than ownership structure that have significant impact on the occurrence of earnings management.