Download or read book The Impact of Pre Merger Earnings Management on Non Cash Acquisition Premia written by Malek Alsharairi and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Using 1320 European mergers and acquisitions (M&As) completed between 2003 and 2012, this paper investigates patterns of earnings management and the implications for non-cash acquisition premia considering both the form of payment and the target firm's listing status. The empirical evidence documented in this study suggests that management teams engage in pre-merger upward earnings management and that it is more evident for private rather than for publicly listed targets in order to compensate for the higher information asymmetry. This earnings management procedure leads to higher takeover premia even after controlling for variables such as the acquirer's internal investment opportunities, profitability or available free cash flow.
Download or read book Event Specific Earnings Management written by Malek Alsharairi and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We re-examine the motivation to manage earnings in US M&As, by investigating whether the enactment of SOX has affected pre-merger earnings management. Using a sample of over 700 completed M&As of US public firms during 1999-2008. Using quarterly reports, we track-down earnings management during the four quarters preceding the deal and consequently draw inferences about the implications of SOX on interim reporting practices. We find evidence of earnings management by non-cash acquirers, especially during the two to three quarters prior to the announcement date; this practice is more pronounced in the post-SOX period, suggesting that SOX simply lead to an earlier exercise of pre-merger earnings management. More interestingly, we reveal significant upward earnings management by targets in the last quarter prior to the deal, but only during the post-SOX era.
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 Pre merger Earnings Management written by Malek Ahmad Refai Alsharairi and published by . This book was released on 2012 with total page 287 pages. Available in PDF, EPUB and Kindle. Book excerpt:
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 Stock Payment Acquirer s Pre Acquisition Earnings Management and Its Post Acquisition Performance written by Pascal Alphonse and published by . This book was released on 2017 with total page 31 pages. Available in PDF, EPUB and Kindle. Book excerpt: For an M&A context, this paper investigates stock payment acquirers' trade-off strategy between accruals-based earnings management (AM) and real earnings management (REM) and it impacts on firm's post-acquisition performance during the period before and the period after the Sarbanes-Oxley Act (SOX). We find that stock payment acquirers, in addition to using pre-acquisition AM, are likely to use REM. Additionally, “mixed-stock” acquirers (stock payments greater than 50% but less than 100%) show more significant AM behaviors than the stock-for-stock acquirers, as shown in the literature, possibly because the disclosure of this strategy involves the latter firms but not for the former. This paper first illuminates “mixed-stock” acquirers' earnings management (EM) strategy. We also find substitution effects between EM methods and that the choice of EM is closely related to an M&A's payment method, the SOX and whether the acquirer made the acquisition(s) shortly before the SOX. Results of the performance analysis suggest that the SOX has negatively impacts the long-term post-acquisition performance and that mixed-stock acquirers and 100% stock-for-stock firms have similar negative post-acquisition performance and market reactions. Furthermore, we discover mixed effects of EM behaviors on post-acquisition performance. The global picture suggests that, for the most part, the financial market cannot effectively perceive a firm's pre-acquisition EM, and it reacts in a "unified" optimistic way to stock payment deals in the short term. In the long term, it associates a firm's future growth to its current performance and that pre-acquisition management no longer matters, though pre-acquisition AM users show better performance.
Download or read book The Post Merger Performance of the European M As written by Malek Alsharairi and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper empirically examines the post-merger performance of a sample of 1,320 European mergers and acquisitions deals. Specifically, we investigate the impact of pre-merger earnings management of acquirers on both the short-term and long-term post-merger performance, for M&A deals completed between 2003-2012, considering both the form of payment and the target firm's listing status. The findings suggest that acquirers report higher abnormal accruals before those deals where they pay with their stock and the target firms are private. The reported evidence suggests that, as a consequence, investors correct for these efforts in the long-term post-merger period - usually within the first 12 months. Moreover, acquirers are likely to experience positive abnormal returns in case of bidding for private targets, whereas negative abnormal returns are documented in case of a publicly traded target, respectively.
Download or read book Earnings Management by Acquiring Firms in Stock for Stock Mergers written by Merle Erickson and published by . This book was released on 1998 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the manipulation of accounting earnings in the period preceding the announcement and completion of stock for stock mergers by a sample of acquiring firms. Results indicate that in the quarters prior to the merger, acquiring firms manage earnings upward. This result is consistent with the conclusion that acquiring firms use accounting procedures in an attempt to increase their stock price prior to stock for stock mergers.Further investigation indicates that unexpected accounting accruals are related to the economic benefits at stake to the acquiring firm and its manager-shareholders. We measure economic benefits to the acquiring firm from increased reported accounting earnings as the deal ratio (deal value as a percentage of the acquiring firm's market value) and management ownership of the acquiring firm. Our analysis indicates that acquiring firm income increasing accounting manipulations prior to a merger are positively related to the relative size of the deal.
Download or read book Accounting for M A written by Amir Amel-Zadeh and published by Routledge. This book was released on 2020-04-29 with total page 331 pages. Available in PDF, EPUB and Kindle. Book excerpt: Spending on M&A has, in aggregate, grown so fast that it has even overtaken capital expenditure on increasing and maintaining physical assets. Yet McKinsey, the leading management consultancy, reports that "Anyone who has researched merger success rates knows that roughly 70% fail". The idea that businesses might be using huge and increasing sums of shareholders’ money for an activity that more often than not leads to failure calls into question the information on which M&A decisions are based. This book presents statistical studies, case material, and standard-setters’ opinions on company accounting before, during, and after M&A. It documents the manipulation of annual accounts by acquirers ahead of share for share bids, biased forecasts of post-merger earnings by bidders, and devices to flatter earnings when recording the deal. It explores the challenges for standard-setters in regulating information flows during and after M&A, and for account-users wishing to learn from financial statements how a deal has affected performance. Drawing on a wide range of international examples, this readable book is targeted not just at accounting specialists but at anyone who is comfortable reading the serious financial press, is intrigued by what is going on in the massive M&A market, and is concerned with achieving better-informed M&A. As such it might be of particular interest to business executives, lawyers, bankers, and investors involved in M&A as well as graduate students interested in researching or learning about the role of accounting in M&A.
Download or read book Earnings Management Lawsuits and Stock for Stock Acquirers Market Performance written by Guojin Gong and published by . This book was released on 2008 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: There is a positive association between stock-for-stock acquirers' pre-merger abnormal accruals and post-merger lawsuits. The probability of lawsuits is also negatively associated with both the market reaction to the merger announcement and the post-merger announcement long-term abnormal returns, indicating that the market only partially anticipates the effects of post-merger announcement lawsuits. Not only are post-merger lawsuits associated with post-merger underperformance, but they are also likely drivers of the underperformance. The study suggests that it is important that investors not only undo the direct stock price effects of earnings management but also factor the contingent legal costs associated with earnings management.
Download or read book Bidder Earnings Management Cynical Targets and Acquisition Premia written by Malek Alsharairi and published by . This book was released on 2016 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Mergers and acquisitions are the result of negotiations between bidder and target managers and shareholders where both sides have incentives to manipulate the value of shares and assets. While a naive target investor may perceive higher share value for a bidder who engages in income increasing earnings management, an informed target would recognize that the impact of such management is transient. In this paper, we find that non-cash acquirers that adopt income-increasing pre-merger earnings management pay higher acquisition premia in completing their M&A deals. However, there is no significant relationship between earnings management and acquisition premia in cash bids, and evidence suggests that there is no significant incremental impact of bidder earnings management on premia for stock transactions versus cash transactions. Our results support the “cynical investor hypothesis,” which posits that target management and its financial advisors are suspicious of bidders with low earnings quality and are able to detect and thwart bidder earnings management schemes designed to obtain a lower acquisition price in stock transactions. The results are counter to the naive investor hypothesis.
Download or read book Earnings Management Around Mergers and Acquisitions written by Eugenie Ann Ardoin Goodwin and published by . This book was released on 2009 with total page 158 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Abnormal Accruals and Managerial Intent written by Henock Louis and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the extent to which managers report opportunistically prior to corporate events by analyzing the association between the timing of stock swap announcements and completions and acquirers' reporting behaviors. Using the timing of merger announcements and completions to infer managerial intent, we show that stock-for-stock acquirers' reporting behaviors are opportunistic. More specifically, we show that stock-for-stock acquirers that inflate earnings the most tend to announce mergers on Fridays, while distancing some of their earnings management activities from the merger announcement date. The negative association between the post-merger announcement market performance and pre-merger announcement abnormal accruals is more pronounced for Friday announcers than for non-Friday announcers. Furthermore, the differential pre-merger abnormal accruals across Friday and non-Friday announcers are observed mainly when the announcement date is relatively close to the completion date. Overall, the evidence supports the notion that pre-acquisition abnormal accruals are related to deliberate opportunistic managerial decisions.
Download or read book Bank Mergers Acquisitions written by Yakov Amihud and published by Springer Science & Business Media. This book was released on 2013-04-17 with total page 249 pages. Available in PDF, EPUB and Kindle. Book excerpt: As the financial services industry becomes increasingly international, the more narrowly defined and historically protected national financial markets become less significant. Consequently, financial institutions must achieve a critical size in order to compete. Bank Mergers & Acquisitions analyses the major issues associated with the large wave of bank mergers and acquisitions in the 1990's. While the effects of these changes have been most pronounced in the commercial banking industry, they also have a profound impact on other financial institutions: insurance firms, investment banks, and institutional investors. Bank Mergers & Acquisitions is divided into three major sections: A general and theoretical background to the topic of bank mergers and acquisitions; the effect of bank mergers on efficiency and shareholders' wealth; and regulatory and legal issues associated with mergers of financial institutions. It brings together contributions from leading scholars and high-level practitioners in economics, finance and law.
Download or read book CEO Characteristics and Earnings Management written by Thai Quoc Nguyen and published by . This book was released on 2018 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: Previous research suggests that share-financed acquirers inflate their earnings before merger and acquisition announcements. The existing literature also indicates that characteristics of chief executive officers (CEO) could affect earnings management. In this study, we extend prior studies by examining the relationships between CEO characteristics and accrual earnings management in share-financed acquirers before mergers and acquisitions. We find that CEOs with high financial expertise and high reputation are associated with lower abnormal accruals in stock acquirers. The correlations are statistically significant and consistently exist in the first year before deal announcements. The findings are robust as we measure abnormal accruals in different ways and employ different models. The evidence suggests that CEO characteristics have an impact on earnings management in the contexts of mergers and acquisitions and have some implications for practitioners.
Download or read book Stock for stock Mergers Directors Characteristics and Real Activities Manipulation written by Olukemi Olutoyin Fasipe and published by . This book was released on 2015 with total page 180 pages. Available in PDF, EPUB and Kindle. Book excerpt: The purpose of this study is to examine whether firms which engage in stock-for-stock mergers manipulate real activities in the fiscal year preceding the merger announcement. In addition, I examine whether certain directors' characteristics are effective in curtailing or instead are associated with real activities manipulation. In stock-for stock mergers, the number of shares that the acquiring firm has to exchange for each share of the target firm depends on the stock price of the acquirer on the agreement date. Consequently, if the stock price of the acquirer is high on the agreement date, the acquirer will issue few shares to pay for the cost of acquiring the target. The inverse relation between the stock price and the stock swap ratio gives the acquirer incentives to manage earnings upwards in order to inflate its stock price prior to the merger agreement. While extant literature provides mixed results as to whether firms which pay for their acquisitions using stock engage in earnings management by manipulating accruals, there is scant literature on acquiring firms and real activities manipulation. Although prior studies use pre-SOX data to examine the earnings management behavior of US acquiring firms, I focus on the post-SOX period when firms have more incentives to manipulate real activities. Even though acquiring firms have incentives to inflate earnings in order to reduce the cost of acquisition, the board of directors and the audit committee may prevent managers from manipulating real activities. Therefore, the two research questions that I address in this study are: (1) do firms which finance their acquisitions primarily with stock manipulate real activities in order to increase their stock price in the fiscal year prior to the merger announcement than firms which finance their acquisitions with cash? (2) how do directors' characteristics affect the ability of managers of acquiring firms to manipulate real operations?
Download or read book Earnings Management Around Mergers and Acquisitions written by Sanit Daochompoo and published by . This book was released on 2014 with total page 52 pages. Available in PDF, EPUB and Kindle. Book excerpt:
