Iqbal, A. and Espenlaub, S. and Strong, N. (2009) Earnings management around UK open offers. European Journal of Finance, 15 (1). pp. 29-51. ISSN 1351-847X Print/1466-4364 Online.
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We examine the long run operating and stock price performance of UK open offer firms in the context of the earnings management hypothesis.We find that in the pre-offer period offer firms report significant improvements in their operating performance unrelated to cash flow performance. Results on return performance show that offer firms outperform various benchmarks in the pre-offer year but underperform up to four years after the offer. Regression results show that pre-offer discretionary current accruals predict the long-run post-offer return underperformance but do not predict the short-run reaction to SEO announcements. Our findings are more consistent with the earnings management hypothesis than with either the timing hypothesis or the managerial response hypothesis and suggest that investors do not take full account of the information available at the time of open offers.
|Uncontrolled keywords:||Earnings management, open offers, SEOs, return performance, operating performance|
|Subjects:||H Social Sciences > HG Finance|
|Divisions:||Faculties > Social Sciences > Kent Business School > Accounting and Finance|
|Depositing User:||Abdullah Iqbal|
|Date Deposited:||18 Mar 2009 17:52|
|Last Modified:||14 Jan 2010 14:36|
|Resource URI:||http://kar.kent.ac.uk/id/eprint/9654 (The current URI for this page, for reference purposes)|
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