Earnings management around Swedish corporate income tax reforms
by Dennis Sundvik
International Journal of Accounting, Auditing and Performance Evaluation (IJAAPE), Vol. 12, No. 3, 2016

Abstract: Prior literature considers a change in the national corporate income tax (CIT) rate as a strong firm incentive to manage earnings. This article examines the link between two recent CIT reforms in Sweden and earnings management with a large dataset of private firms. The effects of tax rate cuts are estimated on aggregate measures as well as on decomposed measures of accrual-based earnings management. The results suggest that taxation clearly influences these firms in their high book-tax conformity setting. Downward earnings management is documented before the reduction in the CIT rate, consistent with research on public firms with lower book-tax conformity. Primarily accounts receivable is noted to drive these results. Weaker evidence is provided with the inventory and depreciation accrual vehicles. The tax effects are statistically and economically significant. Furthermore, the income-decreasing behaviour prior to the CIT reforms is observed to be persistent over time.

Online publication date: Thu, 21-Jul-2016

The full text of this article is only available to individual subscribers or to users at subscribing institutions.

Existing subscribers:
Go to Inderscience Online Journals to access the Full Text of this article.

Pay per view:
If you are not a subscriber and you just want to read the full contents of this article, buy online access here.

Complimentary Subscribers, Editors or Members of the Editorial Board of the International Journal of Accounting, Auditing and Performance Evaluation (IJAAPE):
Login with your Inderscience username and password:

    Username:        Password:         

Forgotten your password?

Want to subscribe?
A subscription gives you complete access to all articles in the current issue, as well as to all articles in the previous three years (where applicable). See our Orders page to subscribe.

If you still need assistance, please email subs@inderscience.com