Download or read book Earnings Management in Companies Seeking to be Acquired and Its Effect on Chances of Subsequent Acquisition written by Tatiana Garanina and published by . This book was released on 2019 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Earnings management is found to be widely used by managers to alter financial reporting, whereas managers of seeking buyer firms might have particularly strong incentives to do so. The goal of the current research is to analyze the influence of accrual-based earnings management strategies and other factors on ex ante chances of subsequent acquisition of a target company that publicly announces that it is in search for a buyer. In the paper the sample of seeking buyer firms that issued respective announcements in 2010 through 2012 is studied, and by means of binary logistic and regressions the factors of a successful sale are defined.The authors find that acquirers are eager to bid for companies which are profitable and in a good financial state, but only when the latter reflect firm fundamentals, and is not achieved via accrual manipulation.

Download or read book Earnings Management in Firms Seeking to Be Acquired written by Seraina C. Anagnostopoulou and published by . This book was released on 2015 with total page 64 pages. Available in PDF, EPUB and Kindle. Book excerpt: Empirical evidence regarding accrual-based earnings management around mergers and acquisitions has been setting-specific as far as target firms are concerned. This might be due to the fact that target firms cannot always anticipate an acquisition proposal, and thus lack the motive and the time necessary to manage their earnings in order to facilitate or impede the deal. In this paper, we provide clear evidence of downward earnings management by a sample of target firms that have both time and motive to engage in such actions. These are firms that publicly announce their intention to be acquired. Publicly 'seeking a buyer' represents a rather unusual corporate event, and we find that these firms engage in downward earnings management in the years surrounding the 'announcement year'. To some extent, this result is explained by overrepresentation of low performance and growth among these firms, and it can be interpreted under alternative explanations. Furthermore, we show that such downward earnings management negatively affects the probability for a 'seeking buyer' firm to secure an acquisition within a reasonable amount of time, a possible indication of efficient diligence by prospective buyers having a preference for firms 'seeking buyer' with no informationally obscure earnings.

Download or read book Introduction to Earnings Management written by Malek El Diri and published by Springer. This book was released on 2017-08-20 with total page 120 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides researchers and scholars with a comprehensive and up-to-date analysis of earnings management theory and literature. While it raises new questions for future research, the book can be also helpful to other parties who rely on financial reporting in making decisions like regulators, policy makers, shareholders, investors, and gatekeepers e.g., auditors and analysts. The book summarizes the existing literature and provides insight into new areas of research such as the differences between earnings management, fraud, earnings quality, impression management, and expectation management; the trade-off between earnings management activities; the special measures of earnings management; and the classification of earnings management motives based on a comprehensive theoretical framework.

Download or read book Earnings Management The Influence of Real and Accrual Based Earnings Management on Earnings Quality written by and published by GRIN Verlag. This book was released on 2024-01-31 with total page 81 pages. Available in PDF, EPUB and Kindle. Book excerpt: Master's Thesis from the year 2019 in the subject Business economics - Accounting and Taxes, University of Duisburg-Essen, course: Master Thesis, language: English, abstract: This paper delves into various theories and approaches, aiming to define and differentiate earnings management from related concepts such as fraud, expectation management, and impression management. It explores the goals and incentives driving earnings management, including maximizing or minimizing earnings, beating targets, and smoothing. At the onset of the new millennium, corporate scandals rocked the business world, eroding trust in management, boards of directors, and the accounting profession. In response, regulations and policies aimed at enhancing corporate governance and financial reporting were swiftly implemented. The credibility, clarity, and consistency of financial reporting practices play a pivotal role in enabling investors to make informed decisions. Accurate and fair financial performance representations, as opposed to inflated and misleading figures, are essential for market players, including shareholders and creditors. Investors rely on audited financial reports to guide their investment decisions, underscoring the critical importance of accuracy and reliability in publicly available financial disclosures. Auditors, by reducing the risk of material misstatement, ensure the integrity of the information disclosed in a company's financial statements. Management, with the goal of achieving promised targets and ensuring the company's existence, may engage in earnings management as a strategic contribution to corporate policy. Financial reporting serves as a means to distinguish well-performing companies from their counterparts, facilitating efficient resource allocation and empowering stakeholders to make effective decisions. The disclosed earnings results significantly impact a firm's overall business activities and management decisions, particularly in satisfying analysts' expectations, which can influence equity value. While accounting standards play a role, the quality of financial statements is more influenced by company-specific and institutional factors shaping managers' incentives. These factors lead to financial reporting practices being viewed as the outcome of a cost-benefit assessment.

Download or read book Earnings Management as Predictor of Acquisition Probability written by Magdalena Pikula and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Do Firms that Wish to Be Acquired Manage Their Earnings Evidence from Major European Countries written by Seraina C. Anagnostopoulou and published by . This book was released on 2014 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we examine whether findings on downwards accrual-based earnings management for firms publicly 'seeking a buyer' from the US can be extrapolated outside of the US context, given that past research has indicated that the function of the Merger and Acquisition (M&A) markets is highly dependent on the degree of competition in a country. We test for the existence of earnings management (EM) around such events for firms listed in the largest European stock exchanges between 2000 and 2009, and get evidence that downwards earnings management around 'seeking buyer' announcements more strongly holds for the country with the most competitive market for corporate control in our sample, that is the UK. We consider this finding indicative of the fact that a competitive M&A environment may induce earnings management-prone behavior. We further testify significantly positive abnormal returns around 'seeking buyer' announcements for firms from the UK, but limited such evidence for the other countries, a finding we also attribute to differences in competition and uneven split of benefits among bidders and targets in M&A markets. Finally, we find that EM positively affects abnormal returns around 'seeking buyer' announcements, indicating that market participants tend to compensate for upwards EM, regardless of the degree of competition of the M&A market of a country.

Download or read book Earnings Management and The Post Issue Underperformance of Seasoned Equity Offerings written by Siew Hong Teoh, Ivo Welch, T.J. Wong and published by . This book was released on 1995 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Do Targets Grab the Cash in Takeovers written by Domenico Campa and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Extant research on Mergers and Acquisitions (M&A) provides evidence that acquirers under perform subsequent to the takeover completion. Such evidence is more unequivocal for acquirers that finance the acquisition by issuing equity relative to those that use cash. Current literature recognizes various reasons for this under performance, most of which suggest overvaluation of the acquirers and/or over payment for the targets at the time of acquisition announcement. Alternatively, this paper aims to investigate whether acquirers' post takeover abnormal return is also attributed to target firms' real and/or accrual earnings management. Our results indicate that, on average, targets manage earnings upwards using real transactions rather than accruals, during the year preceding the takeover. More specifically, we find evidence of earnings management through sales among targets of cash acquisitions and that it is significantly and negatively related to the post-acquisition performance of the acquirers. These findings suggest that there is an association between the method of financing in acquisitions and earnings management in target firms, which could impact the post-takeover performance of acquirers.

Download or read book Earnings Management written by Kathleen Yates and published by Nova Science Publishers. This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Earnings management is an issue that directly affects the overall integrity and quality of financial reporting and to date, many studies have been conducted in an attempt to gain an understanding of whether firms are engaging in earnings management, why they do so, what are the motives that drive managers' discretionary behaviour, what are the economic consequences and whether investors can see through this behaviour? In this book, Chapter One reviews the developments and the trends in the contemporary earnings management research and discuss several possible avenues for future research. Chapter Two provides an overview of the most recent studies on earnings management in relation to the financial crisis and the institutional environment and firm characteristics. Chapter Three provides a description of the nowadays most commonly used methods for measuring earnings management in accounting and finance literature. Chapter Four examines earnings management and corporate social responsibility as an entrenchment strategy.

Download or read book Earnings Management Incentives of Target Firms written by Min Shen and published by . This book was released on 2005 with total page 166 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Earnings Management by Acquiring Firms written by Aref Mahdavi Ardekani and published by LAP Lambert Academic Publishing. This book was released on 2013 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book examined the relationship between earnings management and performance of acquiring firms in Malaysia during period of 2004-2010. Earnings management measured by discretionary accruals derived from modified Jones model and firm's performance estimated by monthly Cumulative Abnormal Return. Firms are selected from both listed cash and share acquirers firms on Bursa Malaysia in the period of 2004-2010. This study consists of two steps. In the first step, it examines whether acquirer firms manipulate their earnings prior to acquisition announcement dates and in the second step, it measures the effects of earnings management on performance of acquirer firms by means of simple regression. The results indicated that share acquirer firms unlike cash acquirers manipulated their earnings preceding acquisition announcement date. Furthermore, they presented a negative relationship between earnings management preceding and performance of firms following the acquisition date for share acquirer firms.

Download or read book Earnings Management and the Market Performance of Acquiring Firms written by Henock Louis and published by . This book was released on 2004 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine the market's efficiency in processing manipulated accounting reports and provide an explanation for the post-merger underperformance anomaly. I find strong evidence suggesting that acquiring firms overstate their earnings in the quarter preceding a stock swap announcement. I also find evidence of a reversal of the stock price effects of the earnings management in the days leading to the merger announcement. However, the pre-merger reversal is only partial. There is evidence of a post-merger reversal of the stock price effects of the pre-merger earnings management. The results suggest that the extant evidence of post-merger underperformance by acquiring firms is partly attributable to the reversal of the price effects of earnings management. The study also suggests that the post-merger reversal is not fully anticipated by financial analysts in the month immediately following the merger announcement. However, consistent with suggestions in the financial press that managers guide analysts' forecasts to quot;beatablequot; levels, the effect of the earnings management reversal seems to be reflected in the consensus analysts' forecasts by the time of the subsequent quarterly earnings releases.

Download or read book The Association of Earnings Management with Current Returns Current Market Values Future Returns Executive Compensation and the Likelihood of Being a Target of 10b 5 Litigation written by Christopher L. Jones and published by . This book was released on 1998 with total page 290 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book EARNINGS MANAGEMENT IN CORPORATE ENTERPRISES written by Sandeep Goel and published by Independent Author. This book was released on 2023-05-29 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Earnings management by companies has long been documented in the academic literature. The scale of the problem came under the spotlight, with major scandals around the world, shaking investors' faith in published company accounts. CEOs and other top executives have been found to manage their earnings aggressively, not only through accounting sleight-of-hand but also by skewing corporate policies in the hope of improving their company's apparent performance. In many cases, earnings management was driven by the desire to prop the company's stock price, often the key basis for executive compensation. Earnings management is the intentional misstatement of earnings leading to bottom line numbers that would have been different in the absence of any manipulation. Earnings management does not necessarily mean upward manipulation of earnings, but it includes downward manipulation as well. Earnings management in the present competitive world is an economic reality. In the words of Ralph Ward, "It is easier to hide voodoo numbers under headings that are already fuzzy". The regulators are now increasingly cracking down hard on companies indulging in earnings management and questioning the efficacy of even those accounting standards that were quite acceptable till a few years ago. The borrower firms, in particular, are still comfortable and not helpless in market that supports them more than the lenders. So, what are the options before stakeholders who have always attached extraordinary importance to and relied excessively on financial statements which are now posing new challenges to them. Think of the plight of a common man (shareholder)! Users of financial statements are often forced to wrestle with dramatic differences in reporting practices between companies within the same industries; asymmetry of information abounds. Intangibles, such as the credibility or reputation of corporate management, must be considered when analyzing a company. Discretionary choices in financial reporting that can ultimately lead to, or create; future earnings that drive stock prices must be identified and adjusted for. As a result, financial statements users must develop a keen understanding of the fundamentals underlying each firm's business operations. While the regulatory bodies, viz. SEC and SEBI have been expressing concern over the issue and their comments to investigate earnings manipulation have sparked renewed interest in the area, there has been little contribution in the academic and professional literature on the detection of earnings manipulation, particularly in India. This book is based on a study that aims to unfold designed earnings practices in the Indian corporate enterprises for the period 2003-04 to 2007-08. It contributes to the literature by increasing the knowledge as to where and when earnings management is likely to occur. It tries to assist investors and creditors in making investing and lending decisions by making them aware not only of the reliability (or truthfulness) of financial statements, but also to the relevance and predictive value of information presented in financial statements. Answers to issues and questions raised in the above discussion can help standard setters assess the effects of accounting standards that require management judgment. It would ultimately lead to less erosion of shareholders' value in particular and economy resources in general. So, an insight into earnings management is essential for all the market participants to extract the best use of financial statements. In some sense, the onus lies on academia and financial practitioners to focus on the importance of understanding a firm's accounting practices.

Download or read book Acquiring Firms Earnings Management Strategies Around Merger and Acquisitions written by Sipei Zhang and published by . This book was released on 2017 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates acquiring firms' earnings management (EM) strategies around mergers and acquisition (M&A) in the US market and analyzes firm's post-acquisition performance. Acquirers are shown to use both accruals management (AM) and real earnings management (REM), both prior to and after acquisition. The EM behaviors are not exclusive to firms that employ stock-for-stock payments; firms that use 100% cash payments or mixed cash and stock payments also manage their earnings during the years around acquisition. REM does not act mainly as a substitute for AM, we show that there exist some complementary effects between REM and AM. Finally, the results suggest that the pre-acquisition EM has (positive) negatively effect on the (non-)repetitive acquirer's post-acquisition performance.

Download or read book Earnings management and the Long term market performance of initial public offerings Working Paper 9401 29 written by Siew Hong Teoh,T.J.Wong,Gita R. Rao and published by . This book was released on 1994 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Earnings Accruals and Real Activities Management around Initial Public Offerings written by Peter Ising and published by Springer Science & Business Media. This book was released on 2013-10-06 with total page 242 pages. Available in PDF, EPUB and Kindle. Book excerpt: The beginning of the new millennium was characterized by company scandals in accounting around the world. A transparent and fair presentation of financial statements is beneficial for capital market participants. Especially around initial public offerings different incentives of these players exist to influence financial statements in diverse aspects. Therefore, studies of earnings management try to identify abnormal behavior. Peter Ising covers additional aspects to shed light on substantial drivers of discretionary reporting behavior around going public. Factors like influence on real activities, industry affiliation, and specific years in the IPO process add further insight to this theoretical and practical topic. The dependence on these factors is high and confirms that company specifics are important for interpretation of financial results.