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| Type | Master's Thesis |
| Scope | Discipline-based scholarship |
| Title | Earnings Management Prior to Takeover Announcements and Long- Term Performance |
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| Institution | University of Zurich |
| Faculty | Faculty of Business, Economics and Informatics |
| Number of Pages | 40 |
| Date | 2020 |
| Abstract Text | This thesis examines earnings management practices prior to M&A announcements in the United Kingdom (UK), taking into consideration both streams of earnings management literature: real activities manipulation and accruals manipulation. Consistent with predictions, I nd that, on average, UK stock acquirers have lower discretionary expenditures and therefore engage in signi cantly higher income-increasing earnings management than cash acquirers in the year prior to the merger announcement. However, there is no evidence that stock acquirers in the UK themselves engage in signi cantly more real activities manipulation through the reduction of discretionary expenditures in the year before the announcement year. No evidence of earnings manipulation can be found for all other earnings management proxies. To check that the motive for undertaking incomeincreasing earnings management is to increase prices temporarily, short- and long-term performance are tested. Even though results suggest that acquirers with high earnings management in the scal year ahead of the announcement year underperform more in the long run than acquirers with low earnings management, there is no evidence of overperformance in the short run, which is not in line with predictions. Overall, the results are mixed and it can be concluded that UK acquirers do not manage earnings ahead of M&A announcements as much as expected. |
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