Dissertation defence (Accounting): MSc Ingolf Kloppenburg
Time
1.10.2024 at 12.15 - 16.15
MSc Ingolf Kloppenburg defends the dissertation in Accounting titled “What if firms fake their accounting figures?” at the University of Turku on 1 October 2024 at 12.15 (University of Turku, Turku School of Economics, Lähitapiola lecture hall, Rehtoripellonkatu 3, Turku).
The audience can participate in the defence by remote access: https://echo360.org.uk/section/26773ee5-17f3-49cc-a0c2-8c264d614b60/public
Opponent: Professor Paul A. Griffin (UC Davis Graduate School of Management, University of California, USA)
Custos: Professor Hannu Schadewitz (University of Turku)
Doctoral Dissertation at UTUPub: https://urn.fi/URN:NBN:fi-fe2024091673085
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Summary of the Doctoral Dissertation:
The damaging impact of firms faking their accounting figures (misrepresentation) might have attracted worldwide notice with the bankruptcy of Enron in 2001. However, also further famous cases can be named like AIG, Toshiba, Wirecard, or more recently Evergrand. In all of these cases, shareholders, banks, suppliers, and normal employees lost combined billions. Therefore, I considered it worthy to investigate more around such accounting scandals in my dissertation.
My dissertation bases on a dataset of 684 US firms (1677 firm years) misrepresenting their accounting figures from 1976 until 2014. I am thereby first looking at the characteristics of such misrepresenting firms from the accounting perspective. I am guided by the topics: Reason for the misrepresentation, tool for the misrepresentation, and the outcome of the misrepresentation. In the second essay, I look at the influence of the misrepresentation on the firm’s value as well as on the capital market’s reaction to the misrepresentation. In the third essay, my co-author and me are focusing on the aspect that a misrepresented annual report is incorrect. Hence, the earnings quality of the annual report is low if at all existing. We then tested how financial sell-side analysts are influenced by the low earnings quality.
The results indicate that, from an accounting perspective, differences exist between the characteristics of misrepresenting firms depending on the reason for their misrepresentation. These differences include the reason for the misrepresentation, the tool used, and the outcome. Moreover, firms’ fundamental value substantially increases as a result of misrepresentation, and no evidence is found for a link between firm value and the market reaction to the misrepresentation. In addition, sell-side financial analysts are unaware of the misrepresentation or even misled by it.
My dissertation contributes to positive accounting theory and the fraud triangle by demonstrating how the different reasons for a misrepresentation are aligned with different firm’s accounting characteristics. It also offers insights into market behaviour by elucidating the reactions of the capital market and analysts to financial misrepresentations. This dissertation provides insights for practitioners especially from the field of capital market actors as well as the government bodies by expanding knowledge about how misrepresentations are handled by the capital market and, consequently, have both managerial and legislative importance.
The audience can participate in the defence by remote access: https://echo360.org.uk/section/26773ee5-17f3-49cc-a0c2-8c264d614b60/public
Opponent: Professor Paul A. Griffin (UC Davis Graduate School of Management, University of California, USA)
Custos: Professor Hannu Schadewitz (University of Turku)
Doctoral Dissertation at UTUPub: https://urn.fi/URN:NBN:fi-fe2024091673085
***
Summary of the Doctoral Dissertation:
The damaging impact of firms faking their accounting figures (misrepresentation) might have attracted worldwide notice with the bankruptcy of Enron in 2001. However, also further famous cases can be named like AIG, Toshiba, Wirecard, or more recently Evergrand. In all of these cases, shareholders, banks, suppliers, and normal employees lost combined billions. Therefore, I considered it worthy to investigate more around such accounting scandals in my dissertation.
My dissertation bases on a dataset of 684 US firms (1677 firm years) misrepresenting their accounting figures from 1976 until 2014. I am thereby first looking at the characteristics of such misrepresenting firms from the accounting perspective. I am guided by the topics: Reason for the misrepresentation, tool for the misrepresentation, and the outcome of the misrepresentation. In the second essay, I look at the influence of the misrepresentation on the firm’s value as well as on the capital market’s reaction to the misrepresentation. In the third essay, my co-author and me are focusing on the aspect that a misrepresented annual report is incorrect. Hence, the earnings quality of the annual report is low if at all existing. We then tested how financial sell-side analysts are influenced by the low earnings quality.
The results indicate that, from an accounting perspective, differences exist between the characteristics of misrepresenting firms depending on the reason for their misrepresentation. These differences include the reason for the misrepresentation, the tool used, and the outcome. Moreover, firms’ fundamental value substantially increases as a result of misrepresentation, and no evidence is found for a link between firm value and the market reaction to the misrepresentation. In addition, sell-side financial analysts are unaware of the misrepresentation or even misled by it.
My dissertation contributes to positive accounting theory and the fraud triangle by demonstrating how the different reasons for a misrepresentation are aligned with different firm’s accounting characteristics. It also offers insights into market behaviour by elucidating the reactions of the capital market and analysts to financial misrepresentations. This dissertation provides insights for practitioners especially from the field of capital market actors as well as the government bodies by expanding knowledge about how misrepresentations are handled by the capital market and, consequently, have both managerial and legislative importance.
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