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de prsentation darticle
Outline
Introduction / research question
Explanatory Factors
Research design
Statistical results
Conclusion
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Introduction
Financial statements are supposed to present the
financial/economic situation of the firm.
Research question
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Explanatory Factors at large
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Explanatory Factors : circumstances
Hypothesis
In the case of a friendly tender offer : managers
of the target firm will tend to manage earnings
downward.
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Research design - sample
Tender offers from 1990 to 2003.
Quartiles
Mean Std. dev. 1st 2nd 3rd
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Research design - model
Focus on accruals instead of Accounting methods
Earnings = Cash Flows + Total accruals
TA = [Current Assets Cash] [Current Liabilities Current portion of Long term Debt]
Depreciation and amortization exp ense
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Research design - model
Regression-based Year (p) of expected
expectations model Tender offer year
earnings management
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Results
Abnormal accruals for target and control firms
Target firms Control firms
Year 1 Year 2 Year 1 Year 2
Mean 0.0386 *** 0.0174 0.0001 0.0147
Std. dev 0.0973 0.0945 0.0660 0.0995
1st quartile 0.0693 0.0468 0.0346 0.0466
Median 0.0276 0.0073 0.0026 0.0198
3rd quartile 0.0265 0.0279 0.0361 0.0278
*, **, *** significantly different from zero at the 10%, 5% and 1% respectively
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Results
Comparison of means
Year 1 Year 2
Mean Rank Tests Mean Rank Tests
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Results
Regression results of variables affecting discretionary accruals
Total Debt to Return Operating Firm
DA i =1 + 2 log + 3 + 4 + 5 + 6 + i,j
assets i equiy i on equity i cash-flows type i
Parameter
Variables Estimates Std. Error t-stat Pr > t
Intercept - 0.066 0.067 - 0.988 0.326
Log (Total Assets) 0.029 0.026 1.111 0.270
Debt/Equity 0.145E-03 0.012 - 0.012 0.990
Return on Equity - 0.010 0.039 - 0.245 0.807
Operating Cash Flows - 0.121E-03 0.117E-04 - 1.037 0.303
Firm Type - 0.065 0.018 - 3.506 0.001***
Adjusted R2 = 9.01%
F value = 2.64**
*, **, *** significant at the 10%, 5% and 1% respectively.
Firm Type equals to 1 for target takeover firms and 0 for the control group.
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Conclusion
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Further research
Are those results likely to occur in other European
countries ?
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To be continued
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