Open Market Share Repurchases and Earnings Management

2005 ◽  
Author(s):  
Arturo Rodriguez ◽  
Heng Yue
Keyword(s):  
Earnings Management ◽  
Market Share ◽  
Share Repurchases ◽  
Open Market ◽  
Open Market Share Repurchases

Earnings smoothing around open-market share repurchases

2015 ◽  
Vol 14 (1) ◽  
pp. 64-80
Author(s):  
Hui Di ◽  
Dalia Marciukaityte
Keyword(s):  
Earnings Management ◽  
Market Share ◽  
Discretionary Accruals ◽  
Cash Flows ◽  
Share Repurchases ◽  
Open Market ◽  
Content Type ◽  
Operating Cash Flows ◽  
Earnings Smoothing ◽  
Open Market Share Repurchases

Purpose – The purpose of this paper is to examine whether firms engage in earnings decreasing management before share repurchases to mislead investors or to smooth earnings and improve earnings informativeness. Design/methodology/approach – The authors examine discretionary accruals and cash flows around open-market share repurchases. The primary discretionary accruals measure is industry- and performance-adjusted discretionary current accruals estimated from cash-flow data. Findings – Results show that, firms experience temporary increases in operating cash flows and use negative discretionary accruals to smooth earnings before share repurchases. Firms with the highest pre-repurchase cash flows use the lowest pre-repurchase discretionary accruals. Moreover, pre-repurchase discretionary accruals reflect expectations about future operating cash flows. Firms with the strongest deterioration in operating cash flows after repurchases use the lowest pre-repurchase discretionary accruals. These findings suggest that repurchasing firms use earnings management to increase smoothness and predictability of reported earnings rather than to mislead investors. Originality/value – This paper provides an alternative explanation to the finding of negative discretionary accruals before share repurchases. It adds to the literature on repurchases and earnings smoothing by showing that firms use earnings management around share repurchases to smooth earnings.

scholarly journals Open Market Share Repurchases and Earnings Management

2020 ◽  
Vol 15 (1) ◽  
pp. 31
Author(s):  
Arturo Rodríguez ◽  
Heng Yue
Keyword(s):  
Earnings Management ◽  
Market Share ◽  
Discretionary Accruals ◽  
Significant Part ◽  
Share Repurchases ◽  
Open Market ◽  
Managerial Opportunism ◽  
Repurchase Announcements ◽  
Open Market Share Repurchases

In this study we examine earnings management around open market share repurchases. We examine two hypotheses: managerial opportunism and market response, both of which predict that managers will manage earnings down prior to an open market repurchase. Using 2,939 repurchase announcements during 1980- 1998 we find evidence that managers do manage earnings down before share repurchases. We also find that the market does not identify the earnings manipulation when the repurchase is announced, and that discretionary accruals can explain a significant part of long-term positive returns following repurchases. Altogether the evidence is consistent with the managerial opportunism hypothesis. Further investigation indicates that managers with higher ownership in the firm are more likely to manage earnings down.

scholarly journals EU Regulation and open market share repurchases: new evidence

2021 ◽  
pp. 1-21
Author(s):  
Angeliki Drousia ◽  
Athanasios Episcopos ◽  
George N. Leledakis ◽  
Emmanouil G. Pyrgiotakis
Keyword(s):  
Market Share ◽  
Share Repurchases ◽  
Open Market ◽  
Eu Regulation ◽  
New Evidence ◽  
Open Market Share Repurchases
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