2016
DOI: 10.1016/j.irfa.2016.01.008
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Do targets grab the cash in takeovers: The role of earnings management

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Cited by 25 publications
(30 citation statements)
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“…These results imply that takeover targets do not manage their earnings through sales manipulation in the first period with an earnings release prior to the announcement of the deal, and as such, H1 is rejected. These results are not consistent with those of Campa and Hajbaba (2016), who find evidence indicating that US target companies acquired in the period from 2001 to 2011 exhibit lower cash flows from operations (upwards sales manipulation) in the first year before the acquisition, given a similar level of sales than the years before, but only for cash-acquired targets. Nevertheless, Campa and Hajbaba (2016) do not attempt to partition their sample of targets into three subsamples as in this study, hence their results may be interpreted differently.…”
Section: Empirical Results and Discussioncontrasting
confidence: 95%
See 1 more Smart Citation
“…These results imply that takeover targets do not manage their earnings through sales manipulation in the first period with an earnings release prior to the announcement of the deal, and as such, H1 is rejected. These results are not consistent with those of Campa and Hajbaba (2016), who find evidence indicating that US target companies acquired in the period from 2001 to 2011 exhibit lower cash flows from operations (upwards sales manipulation) in the first year before the acquisition, given a similar level of sales than the years before, but only for cash-acquired targets. Nevertheless, Campa and Hajbaba (2016) do not attempt to partition their sample of targets into three subsamples as in this study, hence their results may be interpreted differently.…”
Section: Empirical Results and Discussioncontrasting
confidence: 95%
“…In contrast to AEM, in which managers adjust assumptions, estimates and choices within the accounting system, REM involves the timing and structuring of normal business activities to achieve a favourably perceived and desired financial reporting result (Kothari et al , 2016; Bereskin et al , 2018). Although AEM has been the primary practice addressed in the EM literature (Dechow et al , 2010; Fang et al , 2016; Lo et al , 2017), recent research shows an increased interest in understanding the role of REM (Campa and Hajbaba, 2016; Bereskin et al , 2018), as chief financial officers would prefer to use REM activities rather than AEM to reach a certain earnings benchmark or target prior to M&As (Graham et al , 2005).…”
Section: Introductionmentioning
confidence: 99%
“…We define firms to be of low accounting quality if they belong to an industry characterized by low accruals quality. We focus on the industry because: (1) this measure is not affected by the target's deliberate manipulations of financial information in anticipation of a takeover (Anagnostopoulou and Tsekrekos, 2015; Campa and Hajbaba, 2016); (2) this allows us to retain private targets in the sample; and (3) McNichols and Stubben (2015) find that acquisitions of targets from low accounting quality industries associate with more negative price reactions for the bidders. Sensitivity tests show that our conclusions are unchanged when we measure accrual quality for public targets.…”
Section: Measures Of Accounting Quality and Target Valuation Difficultymentioning
confidence: 99%
“…Though on average mergers may create value, not all transactions are successful. Mispricing of target firms can lead to acquirers incurring negative returns around the announcement period (e.g., Han et al 1998) or a negative longrun post-acquisition performance (e.g., Campa and Hajbaba 2016). Acquirers often misprice targets and overpay for them, causing a wealth transfer from acquirer to target shareholders (Moeller et al 2005).…”
Section: Introductionmentioning
confidence: 99%
“…;Campa and Hajbaba 2016;McNichols and Stubben 2015;Moeller et al 2005;Rabier 2018;Rhodes-Kropf et al 2005). Prior literature has also related targets' accounting quality to bid prices (e.g., McNichols and Stubben 2015; Raman et al 2013; Skaife and Wangerin 2013), while Rabier (2018) examines the relative valuation roles of aggregate earnings and book value of equity in merger pricing.…”
mentioning
confidence: 99%