Directors’ recommendations on takeover bids and the management of earnings: Evidence from Australian takeovers

This article investigates whether Australian companies manage their earnings during takeover bids in a manner consistent with the earnings-management hypothesis. This hypothesis predicts that directors who reject a bid use accrual accounting to increase current earnings, supporting their claim that the bid, relative to earnings, is inadequate. Likewise, directors who accept a bid are predicted to use accrual accounting to decrease current earnings. Overall, the results are not consistent with the earnings-management hypothesis. However, some components of unexpected accruals (our proxy for managed earnings) change in the direction predicted by the earnings-management hypothesis, although these changes are not statistically significant. Using industry adjusted performance measures the conclusion is that unexpected accruals are primarily a manifestation of poor financial performance of target firms in the period leading up to the takeover bid. © 1999 Accounting Foundation, University of Sydney

What motivates going private?: An analysis of australian firms

We investigate going private transactions in Australia between 1988 and 1991. Approximately ten percent of all takeovers during this period are instances of going private. In contrast to studies of similar transactions in the United States, we find no direct evidence to support a free cash flow explanation for going private, although going private is frequently preceded by the threat of a takeover offer. However, the free cash flow explanation for going private may not be applicable in Pacific Basin countries where exchange-traded investment activity is in relatively high growth sectors and foreign ownership accounts for a large part of those investment sectors where managerial abuse of free cash flow has been alleged. © AAANZ

Determinants of short-term value creation for the bidder: evidence from France

Merger & acquisition, Information asymmetry, Value creation, Toehold, Event study, Market model, G14, G34,