scholarly journals The impact of pre-merger earnings management on non-cash acquisition premia: Evidence from the European market for corporate control

2015 ◽  
Vol 12 (4) ◽  
pp. 587-601 ◽  
Author(s):  
Malek Alsharairi ◽  
Emma L. Black ◽  
Christoph Hofer
Keyword(s):  
Mergers And Acquisitions ◽  
Earnings Management ◽  
Information Asymmetry ◽  
Cash Flow ◽  
Corporate Control ◽  
Free Cash Flow ◽  
Market For Corporate Control ◽  
Management Procedure ◽  
Investment Opportunities ◽  
The Impact

Using 1320 European mergers and acquisitions (M&As) completed between 2003 and 2012, this paper investigates patterns of earnings management and the implications for non-cash acquisition premia considering both the form of payment and the target firm’s listing status. The empirical evidence documented in this study suggests that management teams engage in pre-merger upward earnings management and that it is more evident for private rather than for publicly listed targets in order to compensate for the higher information asymmetry. This earnings management procedure leads to higher takeover premia even after controlling for variables such as the acquirer’s internal investment opportunities, profitability or available free cash flow.

scholarly journals Determinan Manajemen Laba Perusahaan di Sektor Konsumsi

2019 ◽  
Vol 3 (2) ◽  
pp. 96
Author(s):  
Muhammad Fajri
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Cash Flow ◽  
Institutional Ownership ◽  
Free Cash Flow ◽  
Earning Management ◽  
Managerial Ownership ◽  
Leverage Ratio ◽  
Good Corporate Governance ◽  
The Impact

The aim of this research is to provide empirical evidence on the impact of good corporate governance, free cash flow, and leverage ratio on earnings management. Good corporate governance is measured by audit committee’s size, the proportion of independent commissioners, institutional ownership, and managerial ownership. Discretionary accrual is the proxy of earning management. This research used 28 consumer goods companies listed in Indonesia Stock Exchange from 2016 to 2018. Data were analyzed using panel data with random effect model. Based on the result of analysis concluded that all components of good corporate governance (audit committee’s size, the proportion of independent commissioners, institutional ownership, and managerial ownership), have no significant effect on earnings management, on other hand leverage ratio has a negative effect and no significant on earning management, and free cash flow has a positve and no significant effect on earnings management

scholarly journals The Impact of Surplus Free Cash Flow and Stock Market Segmentations on Earnings Management in Jordan: Agency - and Institutional - Theory Perspectives

2020 ◽  
Vol 19 (1) ◽  
Author(s):  
Ahmad A. Toumeh ◽  
Keyword(s):  
Stock Market ◽  
Earnings Management ◽  
Institutional Theory ◽  
Cash Flow ◽  
Management Practices ◽  
Stock Exchange ◽  
Positive Association ◽  
Free Cash Flow ◽  
Statistical Tool ◽  
The Impact

The current research aims at providing evidence concerning the influence of surplus free cash flow (SFCF) and stock market segmentations (SMS) on income-increasing earnings management practices in Jordan. The results, based on a sample of all non-financial companies that were listed on the Amman Stock Exchange (ASE) from 2013 to 2017, confirm the research hypotheses. The Huber-White’s sandwich standard errors for randomeffects regression was used as the primary statistical tool for this study. The findings revealed a significant and positive association between SFCF and income-boosting discretionary accruals (DAC). As well, the results found that SMS was significantly and positively associated with the positive DAC. This research adds value to scholarship by investigating the impact of SMS variable on earnings management. To the best available knowledge, this relationship has not been examined either in Jordan or elsewhere in the world. Further, this is the first empirical attempt to investigate the effect of SFCF on earnings management in Jordan, which provides meaningful information for companies seeking to understand and reduce agency problems within the Jordanian context. KEYWORDS: Earnings management; DAC; surplus free cash flow; SFCF; stock market segmentations; SMS; agency theory; institutional theory; Jordan.

scholarly journals MASALAH KEAGENAN ALIRAN KAS BEBAS, MANAJEMEN LABA DAN RELEVANSI NILAI INFORMASI AKUNTANSI

2018 ◽  
Vol 15 (2) ◽  
pp. 232-246
Author(s):  
Aulia Fuad Rahman
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Stock Price ◽  
Value Relevance ◽  
Agency Problem ◽  
Free Cash Flow ◽  
Potential Conflict ◽  
Book Value ◽  
Negative Effect ◽  
The Impact

Free cash flow agency problem causes potential conflict of interest between managers and shareholders. Managers of firms with high free cash flow and of low growth opportunity tend to invest in marginal or even negative NPV project and use earnings management to camouflage the effects of non-wealth-maximizing investments. As a result, it is predicted that investors will react to earnings management and free cash flow agency problem and therefore reflected in stock price. In this sense, earnings management and free cash flow agency problem is predicted to have an impact on value relevance of accounting information.The objective of this study is to assess the impact of earnings management on value relevance of earnings and book value. This study also investigates the different effect of earnings management on value relevance of earnings and book value between free cash flow agency problem firms and non free cash flow agency problem firms. Result shows that earnings and book value are value relevance and earnings management decreases those value relevances. The result also conclude that the negative effect of earnings management on value relevance of earnings and book value is higher for free cash flow agency problem firms compared to non free cash flow agency problem firms.

scholarly journals MASALAH KEAGENAN ALIRAN KAS BEBAS, MANAJEMEN LABA DAN RELEVANSI NILAI INFORMASI AKUNTANSI

2017 ◽  
Vol 15 (2) ◽  
pp. 232
Author(s):  
Aulia Fuad Rahman
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Stock Price ◽  
Value Relevance ◽  
Agency Problem ◽  
Free Cash Flow ◽  
Potential Conflict ◽  
Book Value ◽  
Negative Effect ◽  
The Impact

Free cash flow agency problem causes potential conflict of interest between managers and shareholders. Managers of firms with high free cash flow and of low growth opportunity tend to invest in marginal or even negative NPV project and use earnings management to camouflage the effects of non-wealth-maximizing investments. As a result, it is predicted that investors will react to earnings management and free cash flow agency problem and therefore reflected in stock price. In this sense, earnings management and free cash flow agency problem is predicted to have an impact on value relevance of accounting information.The objective of this study is to assess the impact of earnings management on value relevance of earnings and book value. This study also investigates the different effect of earnings management on value relevance of earnings and book value between free cash flow agency problem firms and non free cash flow agency problem firms. Result shows that earnings and book value are value relevance and earnings management decreases those value relevances. The result also conclude that the negative effect of earnings management on value relevance of earnings and book value is higher for free cash flow agency problem firms compared to non free cash flow agency problem firms.

scholarly journals Pengaruh Free Cash Flow Dan Kualitas Audit Terhadap Manajemen Laba

2013 ◽  
Vol 4 (2) ◽  
pp. 105
Author(s):  
Dian Agustia
Keyword(s):  
Earnings Management ◽  
Cash Flow ◽  
Audit Quality ◽  
Stock Exchange ◽  
Free Cash Flow ◽  
Earning Management ◽  
Manufacturing Companies ◽  
Multiple Regression Method ◽  
The Impact ◽  
Research Period

AbstractAsymmetric information refers to a situation where one party has more information than the other party. The agency problems arise from asymmetric information in the principal agent contracts. In addition, there are also several factors that could affect earnings management that is free cash flow and audit quality. The aim of this research is to provide empirical evidence about the impact of free cash flow and audit quality variables on discretionary accruals, as a measure of Earnings Management with the control variables company’s size. This research used 103 manufacturing companies listed in Indonesia Stock Exchange, selected using purposive sampling method, during the research period 2007-2011. Data were analyzed using multiple regression method. Based on the result of analysis concluced that the variable independent free cash flow have a negative and significant effect on earning management. It means that companies with high free cash flow will restrict the practice of earnings management. While the audit quality no significance effect on earning management.

Equilibrium Investment and Asset Prices under Imperfect Corporate Control

2005 ◽  
Vol 95 (3) ◽  
pp. 659-681 ◽  
Author(s):  
James Dow ◽  
Gary Gorton ◽  
Arvind Krishnamurthy
Keyword(s):  
Interest Rates ◽  
Cash Flow ◽  
Asset Prices ◽  
Yield Curve ◽  
Dynamic Equilibrium ◽  
Corporate Control ◽  
Free Cash Flow ◽  
Financial Friction ◽  
And Control ◽  
Important State

We integrate a widely accepted version of the separation of ownership and control—Michael Jensen's (1986) free cash flow theory—into a dynamic equilibrium model, and study the effect of imperfect corporate control on asset prices and investment. Aggregate free cash flow of the corporate sector is an important state variable in explaining asset prices, investment, and the cyclical behavior of interest rates and the yield curve. The financial friction causes cash-flow shocks to affect investment, and causes otherwise i.i.d. shocks to be transmitted from period to period. The shocks propagate through large firms and during booms.

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