1.5　Contributions

This book offers a number of empirical contributions to EM literatures.Firstly，it adds to the limited number of studies examining the level of EM in private firms and compares the level of EM among private and public firms，especially in the European setting.Secondly，this book examines the impact of mandatory IFRS adoption on different aspects of EM，such as conservatism，accrual-based and real earnings management.In this respect，this book allows for a broader and more comprehensive understanding of the possible impact of IFRS adoption on EM.

The first empirical chapter，for instance，mainly focuses on country-level.Prior evidence on the differences of EM between private and public firms is conflicting，and either confined to a particular country （Vander Bauwhede et al.，2003；Ball and Shivakumar，2005；Hope et al.，2013），a single regulated industry （Beatty and Harris，1999；Beatty et al.，2002），or specific corporate events （Teoh et al.，1998）.This chapter adds to this limited body of work by examining a large sample of private and public firms across many industries and countries，and outside of specific corporate events.To date，the evidence on how institutional factors shape EM behaviour of private firms is also limited.Prior work documents mainly study the institutional effects on firms’ reporting behaviour using public firms （e.g.，Ali and Hwang，2000；Ball et al.，2000，2003；Fan and Wong，2002；Leuz et al.，2003；Bushman et al.，2004）.Only Burgstahler（2006） assumes that institutions affect private firms，and states that private and public firms respond differentially to institutional factors.At the time of writing，mandatory IFRS adoption is becoming common，and widespread adoption of IFRS is expected to improve accounting quality.So，by using a sample of over 100，000 firm-year observations from 11 European countries from 2001 to 2013，this chapter extends the work of Burgstahler （2006） by taking into consideration the impact of IFRS adoption.By doing this，it enhances standardsetters’ knowledge of EM，and helps them to improve the process of setting accounting standards.For instance，some institutions，such as legal enforcement，are of importance to both private and public firms.These findings highlight the importance of institutional support in the role of financial reporting quality.Therefore，future policy efforts in accounting quality should focus on the enforceability of IFRS.

Secondly，financial reporting practice is sensitive to the incentives which drive managers，and the idea that the use of accounting information in stakeholders’ contracting and monitoring activities may induce managers to manipulate earnings underlies most of the prior studies.However，those studies focus on public firms only，and often fail to distinguish between the influence of accounting-based monitoring and capital market pressures.In order to better assess the influence of capital market pressures on EM，Chapter 4 compares public firms with private firms and employs several proxies that have been widely used in prior research.Specifically，it includes four of the most popular accrual measurements and two measures of firms’ conditional conservatism.

By identifying settings where EM differs between public firms and private firms，Chapter 4 offers a better understanding of the determinants of EM in general.In certain settings，public firms have either greater incentive to use their financial information to influence users by managing earnings or reduced demand for their financial information.When this occurs，accrual quality declines and/or reported earnings become less conservative.For example，the greater conservatism of public firms compared to private firms decreases for firms that have lower leverage.

It also explores the effects of IFRS adoption on EM，and the results show that IFRS adoption is beneficial for public firms；thus，it could help standardsetters to establish a common accounting standard for private firms.Given the fact that EM differs between those two types of firms，it is better to issue accounting standards specifically for private firms.

Recent research shows an increased appreciation for the importance of understanding on how firms manage earnings through real activities manipulation in addition to accrual-based activities.For example，the action has been found to occur in earnings target beating contexts （Roychowdhury，2006），around seasoned equity offerings （Cohen and Zarowin，2010），and prior to initial public offerings （Alhadab et al.，2015）.However，that REM literature has been largely focused on public firm actions，and to date，there is limited evidence regarding private firms’ REM.Prior research has investigated earnings management activity in private firms but is mainly focused on accrualbased earnings management （AEM），and compares the level of AEM between private and public firms both in the US （Hope et al.，2013） and the European setting （Burgstahler et al.，2006）.Compared with REM，AEM is related more to managerial discretion through accounting choice and estimates.To better understand EM activities，chapter 5 explores REM behaviours between private and public firms.On the other hand，this chapter also contributes IFRS and EM literature by examining the impact of mandatory IFRS adoption on EM，and more precisely，on REM.In this respect，this chapter provides a different view of this regulatory change.