TITLE

Do firms manipulate earnings before accelerated share repurchases?

AUTHOR(S)
Chiu, Yung-Chin; Liang, Woan-lih
PUB. DATE
May 2015
SOURCE
International Review of Economics & Finance;May2015, Vol. 37, p86
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
This paper investigates whether firms engaging in accelerated share repurchases (ASRs) conduct downward earnings management prior to repurchase announcements. The ‘commitment’ and high ‘speed’ of share repurchases in ASRs appear to give ASR firms stronger incentive to deflate the pre-repurchase earnings than open market repurchase (OMR) firms, in order to reduce repurchase costs. However, in contrast to the OMRs of Gong, Louis, and Sun (2008), we do not find such earnings management for ASR firms. We conjecture that the Sarbanes–Oxley Act and greater public attention to financial reporting after financial scandals reduce the likelihood that ASR firms adopt accrual-based earnings management.
ACCESSION #
102316309

 

Related Articles

  • EARNINGS MANAGEMENT TO REPORT AN ADDITIONAL CENT OF EPS: EVIDENCE FROM PRE-AND POST-SOX PERIODS. Jordan, Charles E.; Clark, Stanley J.; Pate, Gwen R. // Academy of Accounting & Financial Studies Journal;2015, Vol. 19 Issue 3, p153 

    Prior research suggests certain types of earnings management (e.g., discretionary earnings management) declined noticeably after implementation of the Sarbanes-Oxley Act (SOX) while other forms (e.g., real earnings management) increased in the post-SOX era. The current research examines a form...

  • Bias in Quarterly Estimates of Annual Effective Tax Rates and Earnings Management. Comprix, Joseph; Mills, Lillian F.; Schmidt, Andrew P. // Journal of the American Taxation Association;Spring2012, Vol. 34 Issue 1, p31 

    We investigate whether quarterly annual effective tax rate (ETR) estimates are systematically biased in comparison to year-end actual ETRs. We find that estimated annual ETRs in the first, second, and third quarters are systematically higher than year end ETRs. We then investigate whether firms'...

  • An Analysis of the Impact of the Sarbanes - Oxley Act on Earnings Management. Liu Caixing; David, Yang // Advances in Management;May2011, Vol. 4 Issue 5, p27 

    The Sarbanes-Oxley Act (SOA) is expected to deter financial frauds and improve financial reporting quality. Prior studies have demonstrated that earnings management significantly influences financial reporting quality. This study examines whether SOA mitigates earnings management and therefore...

  • CFO/CEO-Board Social Ties, Sarbanes- Oxley, and Earnings Management. Krishnan, Gopal V.; Raman, K. K.; Ke Yang; Wei Yu // Accounting Horizons;Sep2011, Vol. 25 Issue 3, p537 

    Prior research suggests that the efficacy of a formally independent member of the board of directors could be undermined by social ties with the CEO. In this study, we examine the relation between CFO/CEO-board social ties and earnings management over the 2000-2007 time period. Our results...

  • The Impact of Disclosures of Internal Control Weaknesses and Remediations on Investors' Perceptions of Earnings Quality The Impact of Disclosures of Internal Control Weaknesses and Remediations on Investors' Perceptions of Earnings Quality. He, Luo; Thornton, Daniel B. // Accounting Perspectives;Summer2013, Vol. 12 Issue 2, p101 

    We hypothesize and find that firms making SOX-mandated disclosures of material weaknesses in internal control over financial reporting (ICOFR) exhibit lower investor-perceived earnings quality (IPEQ) than nondisclosers. We measure IPEQ using e-loading, a market-returns-based representation of...

  • Predicting earnings management: A nonlinear approach. Wu, Ruei-Shian // International Review of Economics & Finance;Mar2014, Vol. 30, p1 

    Abstract: This study compares conventional linear and nonlinear accrual models to evaluate their ability to predict earnings management when applied to firm experiencing different performance levels. Linear models, which ignore the nonlinear relation between performance and accruals, result in...

  • The impact of SOX on opportunistic management behavior. Aubert, François; Grudnitski, Gary // International Review of Financial Analysis;Mar2014, Vol. 32, p188 

    Abstract: An innovative aspect of this study is the use of a relatively new metric to capture opportunistic earnings management behavior. We define opportunistic earnings management as the difference between a firm's US-GAAP earnings and ex post earnings consensus derived from forecasts of...

  • Firms highlight reporting benefits of Sarbanes- Oxley.  // Financial Management;Jul/Aug2012, p9 

    The article discusses the automation of organisations' financial reporting structures, an increased level of organisational control over financial reporting, and the U.S. Sarbanes-Oxley Act that prompted these changes.

  • Lawyers Keep Out: Why Attorneys Should Not Participate in Negotiating Critical Financial Numbers Reported by Public Company Clients. Fisher, William O. // Brigham Young University Law Review;2010, Vol. 2010 Issue 5, p1501 

    In response to the financial scandals at the turn of the century, Sarbanes-Oxley and related reforms radically changed the relationship between accountants and the companies they audit. As a result, auditors exert greater power in the negotiations with management that produce critical numbers in...

Share

Read the Article

Courtesy of NEW JERSEY STATE LIBRARY

Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics