Earnings management by friendly takeover targets

Walid Ben‐Amar and Franck Missonier‐Piera
Authors registered in the RePEc Author Service: Franck MISSONIER-PIERA

International Journal of Managerial Finance, 2008, vol. 4, issue 3, 232-243

Abstract: Purpose - Accounting research has emphasized target and bidder managers' incentives to manipulate earnings during corporate control contests. However, prior studies examining earnings management by takeover targets have obtained mixed results. Moreover, the existing evidence is mainly based on US data and hostile mergers and acquisitions (M&A) transactions. The purpose of this study is to examine earnings management by friendly takeover targets in the year preceding the deal announcement in Switzerland. Design/methodology/approach - The paper examines earnings management practices of a sample of 50 Swiss firms that were targets of a friendly takeover proposition during the period 1990‐2002. Discretionary accruals are used as a measure of earnings management. It uses a matching approach and a cross‐sectional regression analysis to test the hypothesis of earnings management by takeover targets. Research limitations/implications - The paper expands and provides further international insights to the existing literature through the investigation of earnings management by takeover targets managers in a European setting and in a friendly corporate control environment. Originality/value - These empirical findings document the existence of a significant downward earnings management during the year preceding the transaction. These results suggest that earnings management incentives may differ between negotiated friendly and hostile disciplinary transactions.

Keywords: Earnings; Accounting policy; Acquistions and mergers; Switzerland (search for similar items in EconPapers)
Date: 2008
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eme:ijmfpp:v:4:y:2008:i:3:p:232-243

DOI: 10.1108/17439130810878811

Access Statistics for this article

International Journal of Managerial Finance is currently edited by Dr Alfred Yawson

More articles in International Journal of Managerial Finance from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().