Do earnings management proxies predict future performance? Evidence from Swedish listed firms

Abstract

Earnings-management proxies are widely used to identify opportunistic reporting, but they may also capture informative discretion or normal operating activity. We assess four accrual-based proxies, two receivables-based and two broader accrual-based, by testing whether they exhibit a core implication of earnings manipulation: weaker future performance or lower persistence when biased accruals reverse. Using Swedish IFRS firms on the OMX Stockholm Main Market, we examine future ROA, CFO, persistence, and receivables reversals. Broader accrual-based proxies, especially ExtAbnAcc, associate more consistently with future performance costs and lower persistence, while receivables-based proxies mainly capture account-level reversals; model specification affects inference.