Effect of Firms' Acquisition Strategy on Earnings Management

Document Type : Research Paper

Authors

Abstract

This study examines whether target firms manage their earnings upward in the period leading to their acquisition or not, using data on a sample of 46 firms listed in Tehran Stock Exchange for the period 1382-87. In this study, discretionary accruals were used as the proxy for earnings management, and we utilized the modified Jones model under balance sheet and cash flow approaches with some modifications to the balance sheet approach. The results show that there was no significant difference between discretionary accruals of target firms for the periods before and after acquisition, nor between discretionary accruals of target firms in the period before acquisition and those of firms in control group.

Keywords

References

- سیگل، سیدنی. (1372). "آمار غیرپارامتری". ترجمه: یوسف کریمی. تهران. انتشارات علامه طباطبایی. صفحه 43.
- عارفی، اصغر. (1385)."بررسی عملکرد تصاحب شرکت‌ها در ایران"، رساله دکتری، دانشگاه شهید بهشتی.
- Baik, B., Kang, J.K., and Morton, R. (2007). Earnings Management in Takeovers of Privately Held Targets, Working Paper, Seoul National University.
- Ben-Amar, W. and Missonier-Piera, F. (2008). Earnings Management by Friendly Takeovers Targets, International Journal of Managerial, Vol. 4, No. 3, pp. 232-243.
- Botsari, A., and Meeks, G. (2008). Do Acquirers Manage Earnings Prior to Share for Share Bid?, Journal of Business Finance and Accounting, Vol. 35, pp. 633-670.
- Dechow, P.M., Sloan, R.G., and Sweeny, A.P. (1995), Detecting Earnings Management. The Accounting Review, Vol. 70, pp. 193-225.
- Easterwood, C.M. (1997/1998). Takeovers and Incentives for Earnings Management: An Empirical Analysis, Journal of Applied Business Research. Vol. 14, No. 1, pp. 29-47.
- Evangelos, K. (2005). Firm Acquisitions and Earnings Management: Evidence from Greece”, Managerial Accounting Journal, Vol. 20, No.7, pp. 663-378.
- Gong, G., Louis, H. and Sun, A. (2008), Earnings Management, lawsuits, Stock-for-Stock Acquirer's Market Performance, Journal of Accounting and Economics, Vol. 46, pp. 62-77.
- Gul, F.A, and Lai, K. W. (2008). Was Audit Quality of Laventhol and Horwath Poor?. Journal of Accounting and Public Policy, Vol. 27, pp. 217-237.
- Hubbard, N. (1999). Acquisition: Strategy and Implementation. Working Paper, Uacmillan Business.
- Ikeda, R. and Doi, N., (1983). The Performances of Merging Firma in Japanese Manufacturing Industry. The Journal of Industrial Economics. Vol. 16 No. 3, pp.257-266.
- Kothari, S.P., Leone, A. and Wasley, C. (2005). Performance Matched Discretionary Accruals. Journal of Accounting and Economics, Vol. 39 No. 1, pp. 161-197.
- Louis, H., (2004), Earnings Management and Market Performance of Acquiring Firms, Journal of Financial Economics, Vol. 74, pp. 121-148.
- Pungaliya, R. S. and Vijh, A. M. (2009). Do Acquiring Firms Manage Earnings?. Working Paper. The University of Lowa.
- Taylor, S.L., and Eddey, P.H. (1999). Directors’ Recommendations on Takeover Bids and the Management of Earnings: Evidence from Australian Takeovers, Abacus, Vol. 35, No. 1, pp. 29-45.
- Wang, S. and Erickson, M. (1999). Earnings Management by Acquiring Firms in Stock for Stock Mergers. Journal of Accounting and Economics, Vol. 27, pp. 149-176.
Journal of Accounting Knowledge
Volume 2, Issue 7 - Serial Number 7
November 2012
Pages 99-120

Files

History

  • Receive Date: 15 January 2011
  • Revise Date: 02 July 2011
  • Accept Date: 17 September 2011

Share

How to cite

Statistics