Do Acquirers Manage Earnings Prior to a Share for Share Bid?

66 Pages Posted: 13 Feb 2008

See all articles by Antonia Botsari

Antonia Botsari

University of Cambridge - Judge Business School; University of Piraeus - Department of Banking and Financial Management; University of Warwick - Warwick Business School

Geoff Meeks

University of Cambridge - Judge Business School

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Abstract

Earnings management by acquirers ahead of share for share bids may affect whether a bid succeeds, and hence which management team controls the target's assets, as well as the distribution of gains between target and acquirer shareholders. This paper tests for such earnings management for the UK, the world's second largest takeover market, in the period 1997-2001 when M&A reached record levels and share for share deals came to account for the majority of expenditure. Using a range of approaches originating in Jones' model, the paper finds evidence consistent with earnings management ahead of share-financed bids.

Keywords: mergers and acquisitions, earnings management, share for share bids, accruals

JEL Classification: M41, M43, M47, G24, G34

Suggested Citation

Botsari, Antonia and Meeks, Geoff, Do Acquirers Manage Earnings Prior to a Share for Share Bid?. Journal of Business Finance and Accounting, 2008, Available at SSRN: https://ssrn.com/abstract=1087418

Antonia Botsari (Contact Author)

University of Cambridge - Judge Business School

Trumpington Street
Cambridge, CB2 1AG
United Kingdom

University of Piraeus - Department of Banking and Financial Management ( email )

80 Karaoli & Dimitriou Str.
18534 Piraeus, 185 34 -GR
Greece

University of Warwick - Warwick Business School

Coventry CV4 7AL
United Kingdom

Geoff Meeks

University of Cambridge - Judge Business School ( email )

Trumpington Street
Cambridge, CB2 1AG
United Kingdom
+44 (0) 1223 764226 (Phone)
+44 (0) 1223 339701 (Fax)

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