Real Earnings Management and Board Independence in Nordic Firms: An Innovation Perspective.
(2022) BUSN79 20221Department of Business Administration
- Abstract
- This research investigates short-term management fixation to meet performance thresholds through real earnings management. Specifically, we examine management decision-making regarding the trade-off between short-term profitability and R&D’s long-term benefits in Nordic firms. Building on established economic and institutional frameworks, along with the most relevant studies in the field, this research examines the influence of earnings and shareholders’ pressures on the managerial tendency to engage in real earnings management through cutting discretionary expenses, focusing on R&D as a proxy of firms’ innovative capacity. From a corporate governance standpoint, this study focuses on the effectiveness of board independence in mitigating... (More)
- This research investigates short-term management fixation to meet performance thresholds through real earnings management. Specifically, we examine management decision-making regarding the trade-off between short-term profitability and R&D’s long-term benefits in Nordic firms. Building on established economic and institutional frameworks, along with the most relevant studies in the field, this research examines the influence of earnings and shareholders’ pressures on the managerial tendency to engage in real earnings management through cutting discretionary expenses, focusing on R&D as a proxy of firms’ innovative capacity. From a corporate governance standpoint, this study focuses on the effectiveness of board independence in mitigating the agency costs of R&D cutting. Given the central role of innovation in Nordic countries’ long-term strategic growth and their forefront position in environmental, sustainability, and governance development, this research is performed in the underexamined region of the Nordics. Centering the analysis on the relationship between performance pressures and R&D expenses cutting (RQ1) and using board independence as a moderator (RQ2), we relied on a sample of 142 Nordic publicly listed companies (between 2014 and 2019). Our results indicate that earnings and shareholders’ pressures are influential antecedents of cutting discretionary R&D expenses. This result goes accordingly with the academic literature on the topic; however, it is newly found in the Nordic setting. The analysis does not provide significant evidence of the expected independent directors’ monitoring effectiveness. As most studies concentrate on the Anglo-American context, we interpret this unforeseen result by accounting for the institutional and cultural characteristics that define the Nordic region. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/9097790
- author
- André, Floris LU and Speciani, Alberto
- supervisor
- organization
- course
- BUSN79 20221
- year
- 2022
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Real Earnings Management, Earnings, Shareholders, Corporate Governance, Board Independence, Innovation, Research & Development
- language
- English
- id
- 9097790
- date added to LUP
- 2022-09-19 14:37:56
- date last changed
- 2022-09-19 14:37:56
@misc{9097790,
abstract = {{This research investigates short-term management fixation to meet performance thresholds through real earnings management. Specifically, we examine management decision-making regarding the trade-off between short-term profitability and R&D’s long-term benefits in Nordic firms. Building on established economic and institutional frameworks, along with the most relevant studies in the field, this research examines the influence of earnings and shareholders’ pressures on the managerial tendency to engage in real earnings management through cutting discretionary expenses, focusing on R&D as a proxy of firms’ innovative capacity. From a corporate governance standpoint, this study focuses on the effectiveness of board independence in mitigating the agency costs of R&D cutting. Given the central role of innovation in Nordic countries’ long-term strategic growth and their forefront position in environmental, sustainability, and governance development, this research is performed in the underexamined region of the Nordics. Centering the analysis on the relationship between performance pressures and R&D expenses cutting (RQ1) and using board independence as a moderator (RQ2), we relied on a sample of 142 Nordic publicly listed companies (between 2014 and 2019). Our results indicate that earnings and shareholders’ pressures are influential antecedents of cutting discretionary R&D expenses. This result goes accordingly with the academic literature on the topic; however, it is newly found in the Nordic setting. The analysis does not provide significant evidence of the expected independent directors’ monitoring effectiveness. As most studies concentrate on the Anglo-American context, we interpret this unforeseen result by accounting for the institutional and cultural characteristics that define the Nordic region.}},
author = {{André, Floris and Speciani, Alberto}},
language = {{eng}},
note = {{Student Paper}},
title = {{Real Earnings Management and Board Independence in Nordic Firms: An Innovation Perspective.}},
year = {{2022}},
}