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Earnings management and insider trading: A study of firms listed on Nasdaq OMX Stockholm
Uppsala universitet, Humanistisk-samhällsvetenskapliga vetenskapsområdet, Samhällsvetenskapliga fakulteten, Företagsekonomiska institutionen.
Uppsala universitet, Humanistisk-samhällsvetenskapliga vetenskapsområdet, Samhällsvetenskapliga fakulteten, Företagsekonomiska institutionen.
2015 (Engelska)Självständigt arbete på avancerad nivå (masterexamen), 20 poäng / 30 hpStudentuppsats (Examensarbete)
Abstract [en]

There is an ethical dilemma and a legal issue of earnings management and insider trading, and a risk of it affecting the accuracy of financial markets. The use of earnings management leads to an information asymmetry between the corporate management and the financial markets. This paper investigates how earnings management affects insider trading and whether insider trading is a good information source about earnings quality and future performance. Studying companies believed to have conducted earnings management on Nasdaq OMX Nordic Stock Exchange (Stockholm) from 2005 through 2014 indicates that: (1) insiders do not sell shares after managing earnings upwards; (2) the relationship between insider selling and future earnings performance is positive, contradicting agency theory and previous research; (3) the market’s reaction to the earnings announcement one year after suspected earnings management is positive for firms where insiders have sold shares, and vice versa. Taken together, our results are not in line with those of previous studies conducted on other markets. This is likely to depend on the unique Swedish setting with the existence of endowment insurances, where insiders can trade shares without having to disclose their transactions to the market. Because of this, we argue that insider trading is not an adequate signal about Swedish firms’ earnings quality and future performance. We therefor further emphasize the importance of a change in the Swedish legislation, in order to insure the accuracy of financial markets and to protect other investors. 

Ort, förlag, år, upplaga, sidor
2015. , s. 44
Nyckelord [en]
Earnings management; Insider trading; Earnings around thresholds; Information asymmetry; Agency theory; Endowment insurance
Nationell ämneskategori
Företagsekonomi
Identifikatorer
URN: urn:nbn:se:uu:diva-256488OAI: oai:DiVA.org:uu-256488DiVA, id: diva2:825622
Utbildningsprogram
Masterprogram i företagande och ledning
Handledare
Tillgänglig från: 2015-06-24 Skapad: 2015-06-24 Senast uppdaterad: 2015-06-24Bibliografiskt granskad

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Earnings management and insider trading – Nielsen & Westberg(5259 kB)1686 nedladdningar
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Typ fulltextMimetyp application/pdf

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