Download or read book Real Earnings Management Around Open Market Share Repurchases written by Jing Ma and published by . This book was released on 2017-01-27 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation, "Real Earnings Management Around Open Market Share Repurchases" by Jing, Ma, 馬靜, was obtained from The University of Hong Kong (Pokfulam, Hong Kong) and is being sold pursuant to Creative Commons: Attribution 3.0 Hong Kong License. The content of this dissertation has not been altered in any way. We have altered the formatting in order to facilitate the ease of printing and reading of the dissertation. All rights not granted by the above license are retained by the author. Abstract: This thesis investigates real earnings management behaviors in the context of open market share repurchase. I use three proxies developed by Roychowdhury (2006) to measure real earnings management behaviors, including abnormal cash flow from operations (DCFO), abnormal production costs (DPROD) and abnormal discretionary costs (DDISX). In comparison to existing literature that documents the impact of accrual earnings management on post-repurchase performance, this thesis endeavors in investigate thoroughly both methods of earnings management. I find that repurchasing firms not only engage in accrual earnings management as is documented in Gong, Louis and Sun (2008) but also engage in real earnings management. Empirically, repurchasing firms have significant positive DCFO and negative DPROD in the year of announcements, both of which are earnings-reducing real activities. Repurchasing firms do not exhibit significant evidence of earnings-reducing DDISX in the year of announcements, but they experience earnings-reducing DDISX in all the three years prior to announcements. As predicted, the operating performance and stock performance of a repurchasing firm can be explained by pre-announcement earnings-reducing accrual manipulations and pre-announcement earnings-decreasing real earnings management. Specifically, the pre-repurchase downward DPROD makes the most important explanatory variable in both repurchasing and actual repurchasing samples whether controlling for DACC or not. The pre-repurchase upward DCFO is most relevant in determining the post-repurchase stock performances. DOI: 10.5353/th_b5295510 Subjects: Stock repurchasing Earnings management

Download or read book Real Earnings Management Around Open Market Share Repurchases written by 馬靜 and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Open Market Share Repurchases and Earnings Management written by Arturo Rodriguez and published by . This book was released on 2015 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the market efficiency in processing manipulated accounting statements, and provide an explanation for the long-run performance anomaly associated with open market share repurchases. We find strong evidence that repurchasing firms understate their earnings report around repurchases announcements. Furthermore, we find that the market does not identify the earnings manipulation when the repurchase is announced, and that discretionary accruals can explain a significant part of long-term positive returns following repurchases. This study also suggests that analysts are misled by the use of discretionary accruals. Analysts are more pessimistic for companies reporting low discretionary accruals. Further investigation indicates that discretionary accruals are related to the economic benefits at stake to the managers. Our analysis indicates that managers with higher ownership in the firm are more likely to manage earnings down. Altogether the evidence is consistent with the managerial opportunism hypothesis.

Download or read book Earnings Management and Firm Performance Following Open Market Repurchases written by Guojin Gong and published by . This book was released on 2007 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide evidence suggesting that both the post-repurchase long-term abnormal returns and the reported improvement in operating performance documented in prior studies are driven, at least partly, by pre-repurchase downward earnings management, rather than genuine growth in profitability. The average firm reports significantly negative abnormal accruals prior to open-market repurchases. The extent of the downward earnings management increases with the percentage of the company that managers repurchase and CEO ownership. The pre-repurchase abnormal accruals are also significantly negatively associated with both future operating performance and future stock performance, and the negative associations are driven almost exclusively by those firms that report the largest income-decreasing abnormal accruals prior to the repurchases. The study suggests that one reason firms experience post-repurchase abnormal returns is that the post-repurchase realized earnings growth exceeds expectations formed on the basis of the pre-repurchase deflated earnings numbers.

Download or read book Share Repurchases written by Theo Vermaelen and published by Now Publishers Inc. This book was released on 2005 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: This survey derives some of the key results on the taxation of international investment in variants of one model of multinational investment.

Download or read book Accretive Share Repurchases Versus Accrual Real Earnings Management written by Erik Olson and published by . This book was released on 2020 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper seeks to address whether managers use accretive repurchases in conjunction with or to the exclusion of other earnings management tools. Prior literature has shown that managers use accretive repurchases to meet or beat analyst forecasts of earnings per share (EPS). However, whether such planned and aggressive repurchasing of common shares outstanding is used as a complement or substitute for traditional tools of earnings management remains unexplored. I find a complementary relationship between accretive repurchases and income-increasing discretionary accruals, a complementary relationship between accretive repurchases and abnormal discretionary expense cuts, and a substitutional relationship between accretive repurchases and abnormal operating cash flow reductions. In addition, I find that the likelihood to use income-increasing discretionary accruals in conjunction with accretive repurchases is significantly driven by the number and dollar amount of stock and stock options awarded to the firm's CEO in the previous year. I also find that firms with a CFO who is co-opted by the firm's CEO are more likely to use accretive repurchases than firms in which the CFO is not co-opted by the CEO. This suggests that a CEO likely influences the CFO to make capital allocation decisions that benefit the CEO, but may not be in the best long run interests of the firm. Finally, I find that transient investors strongly predict whether a firm uses accretive repurchases, suggesting that managers use this tool to avoid price pressures imposed by not hitting quarterly forecasts of EPS.

Download or read book Corporate Payout Policy written by Harry DeAngelo and published by Now Publishers Inc. This book was released on 2009 with total page 215 pages. Available in PDF, EPUB and Kindle. Book excerpt: Corporate Payout Policy synthesizes the academic research on payout policy and explains "how much, when, and how". That is (i) the overall value of payouts over the life of the enterprise, (ii) the time profile of a firm's payouts across periods, and (iii) the form of those payouts. The authors conclude that today's theory does a good job of explaining the general features of corporate payout policies, but some important gaps remain. So while our emphasis is to clarify "what we know" about payout policy, the authors also identify a number of interesting unresolved questions for future research. Corporate Payout Policy discusses potential influences on corporate payout policy including managerial use of payouts to signal future earnings to outside investors, individuals' behavioral biases that lead to sentiment-based demands for distributions, the desire of large block stockholders to maintain corporate control, and personal tax incentives to defer payouts. The authors highlight four important "carry-away" points: the literature's focus on whether repurchases will (or should) drive out dividends is misplaced because it implicitly assumes that a single payout vehicle is optimal; extant empirical evidence is strongly incompatible with the notion that the primary purpose of dividends is to signal managers' views of future earnings to outside investors; over-confidence on the part of managers is potentially a first-order determinant of payout policy because it induces them to over-retain resources to invest in dubious projects and so behavioral biases may, in fact, turn out to be more important than agency costs in explaining why investors pressure firms to accelerate payouts; the influence of controlling stockholders on payout policy --- particularly in non-U.S. firms, where controlling stockholders are common --- is a promising area for future research. Corporate Payout Policy is required reading for both researchers and practitioners interested in understanding this central topic in corporate finance and governance.

Download or read book Can the Open Market React to Stock Repurchases Announcement Correctly written by Chun An Li and published by . This book was released on 2019 with total page 22 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, we explore the market reaction to the announcement of stock repurchase plans, and the mutual influence between the actual fulfillment rate of stock repurchase plans and the degree of earnings management. From the perspective of earnings management behavior, this paper also analyzes the actual fulfillment rate, and discusses the information asymmetry, firms may carry out earnings management before stock repurchases, to mislead the investors into believing the prettified financial statements, to induce the investors to invest, and convey false signals to the market. The empirical results demonstrate that the cumulative abnormal return (CAR) resulting from true signals is higher than that resulting from false signals. Further, the phenomenon is more significant in the hi-tech industry than in traditional industries, and the firms with Purpose 3 (support the stock prices to maintain firm credit and shareholders' equity), a significant, positive abnormal return is observed on the day before and the day after the announcement day. In bullish periods, abnormal returns are not significant; in bearish periods, a significant, positive abnormal return is observed. These findings are applicable not only to the research samples but also to the samples when the extreme values are removed. Therefore, the empirical results are still robust.

Download or read book Share Repurchases and Earnings Management written by Jin Yu and published by . This book was released on 2009 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Stock repurchase and abnormal returns in den USA and Germany written by Jan Heise and published by GRIN Verlag. This book was released on 2008-02-26 with total page 21 pages. Available in PDF, EPUB and Kindle. Book excerpt: Seminar paper from the year 2006 in the subject Business economics - Investment and Finance, grade: A+, University of Massachusetts - Dartmouth (Charlton Business School), course: Masters Kurs: Finance for Decision Making, language: English, abstract: Two of the most prominent trends in corporate finance in the U.S. during the past 15 years are the growing popularity of share repurchases and the decreasing popularity of dividends. Repurchasing stocks is another way for managers to distribute money to shareholders, thus it plays an equivalent role as dividend payments. Consistent with Grullon and Michaely (2002) U.S. corporations distribute cash by rather repurchasing stock than by paying dividends to shareholders. Fama and French (2001) argue in the same direction. Their study provides evidence that the proportion of corporations paying cash dividends fell from 66.5% in 1978 to 20.8% in 1999. According to Grullon’s (2000) findings the total of share repurchases exceeded the total of dividend payment for industrial firms in 1998. In Germany share repurchases were highly restricted until 1998. As a consequence the volume of repurchases was small. The popularity of repurchases in the U.S. and in other countries was a strong argument for lifting the restrictions. These days, German companies announce buybacks regularly. Although capital markets in the USA and Germany are efficient the impact of stock repurchase programs differ, resulting in higher stock performance after buyback announcements in Germany than in the USA.

Download or read book Real Earnings Management and Supplemental Executive Retirement Plans written by Christine E. L. Tan and published by . This book was released on 2013 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Increasingly, shareholders and regulators have been calling for a reigning in of executive salaries. Most of this discussion has focused on bonuses and stock options, the more observable portions of an executive compensation package. However long term incentive pay, such as supplemental executive retirement plans (SERPs), has become a significant portion of executive compensation and is more difficult to monitor. This paper examines whether managers use real earnings management in the form of Accelerated Share repurchases (ASR) to increase total compensation through this more obscure or 'stealth', area of pay. This is because ASRs tend to have a more immediate and significant impact on EPS versus open market repurchases (OMRs). While SERPs provide an opportunity for CEOs to hide compensation, stronger managerial power may enhance this opportunity. We find evidence that managers who have SERPs in place are significantly more likely to choose ASRs versus OMRs. We also find that as executives' horizon shorten, they are also more likely to use this stronger form of earnings management (ASR). Additionally, we find that, on average, ASR firms have higher managerial power than OMR firms. Finally, we are able to provide direct evidence of the economic significance of SERP programs. Additional analyses provide further support for the link between SERPs and real earnings management in the form of share repurchase choice.

Download or read book Payout Policy written by and published by . This book was released on 2007 with total page 83 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dividend policy continues to be among the premier unsolved puzzles in finance. A number of theories have been advanced to explain dividend policy. This e-book briefly reviews the principal theories of payout policy and dividend policy and summarizes the empirical evidence on these theories. Empirical evidence is equivocal and the search for new explanation for dividends continues.

Download or read book Debt Equity Swaps written by International Monetary Fund and published by International Monetary Fund. This book was released on 1988-01-01 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper describes the development of debt/equity swaps in the years following the emergence of the international debt crisis. It discusses some of the possible advantages and disadvantages offered by such swaps to three groups of participants--the commercial banks, the investing companies, and the indebted countries. It also provides an analysis of how these swaps are treated in the balance of payments accounts of an indebted country and discusses their possible effects on that country’s money supply, foreign exchange rate and economic growth. The paper concludes that debt/equity swaps can help to make a country’s debt burden more manageable and can contribute to economic growth, but only to a limited extent.

Download or read book Market Underreaction to Open Market Share Repurchases written by David Ikenberry and published by . This book was released on 1994 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine long-run firm performance following open market share repurchase announcements which occurred during the period 1980 to 1990. We find that the average abnormal four-year buy-and-hold return measured after the initial announcement is 12.1 percent. For `value' stocks, companies more likely to be repurchasing shares because of undervaluation, the average abnormal return is 45.3 percent. For repurchases announced by `glamour' stocks where undervaluation is less likely to be an important motive, no positive drift in abnormal returns is observed. Thus, at least with respect to value stocks, the market errs in its initial response and appears to ignore much of the information conveyed through repurchase announcements.

Download or read book Earnings Management written by Joshua Ronen and published by Springer Science & Business Media. This book was released on 2008-08-06 with total page 587 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book is a study of earnings management, aimed at scholars and professionals in accounting, finance, economics, and law. The authors address research questions including: Why are earnings so important that firms feel compelled to manipulate them? What set of circumstances will induce earnings management? How will the interaction among management, boards of directors, investors, employees, suppliers, customers and regulators affect earnings management? How to design empirical research addressing earnings management? What are the limitations and strengths of current empirical models?

Download or read book Stock Repurchases as an Earnings Management Device written by Paul Hribar and published by . This book was released on 2004 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the role of earnings per share management in the decision to repurchase shares. We identify the conditions under which repurchases increase EPS and document the frequency of EPS increasing and EPS decreasing repurchases among U.S. firms from 1988 to 2001. We then compare the empirical distribution of EPS increasing and EPS decreasing repurchases relative to pre-repurchase forecast errors to examine whether EPS considerations appear to affect the repurchase decision. Finally, we examine the share price response to quarterly earnings announcements to determine how investors price the repurchase-induced component of reported EPS. We find evidence that a disproportionately large number of firms have EPS increasing repurchases when they would have marginally missed analyst forecasts without the repurchase, and a disproportionately small number of firms have EPS decreasing repurchases when they are close to analyst forecasts before the repurchase. Also, the market appears to discount the repurchase induced component of earnings surprise relative to the earnings surprise attributable to operations. Finally, firms that meet or exceed expectations only because of the repurchase receive approximately a 60% lower valuation premium than firms that meet or exceed expectations without a repurchase.

Download or read book Operating Performance Following Open Market Share Repurchase Announcements written by Erik Lie and published by . This book was released on 2004 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: I document that operating performance improves following 4,729 announcements of open market share repurchase programs from 1981 through 2000. Moreover, the capital market responds favorably to earnings announcements after the program announcements. Further analysis reveals that both the operating performance improvement and the positive earnings announcement returns are limited to those firms that actually repurchase shares during the same fiscal quarter. Last, I report that a subsample of firms that initiate the repurchases in quarters following the program announcements experience improvements after the initiation quarter, suggesting that actual repurchases, and not announcements per se, portend future performance improvements.