Abstract
This study provides further evidence of earnings management around security offerings. We find positive and significant discretionary current accruals coincident with offerings of reverse LBOs. Issuers in the most aggressive quartile of earnings management have a one-year aftermarket return that is between 15% and 25% less than the most conservative quartile. We also find a negative and significant relation between abnormal accruals and post-issue abnormal returns within the first year after the offering. The relation remains after controlling for book-to-market ratio, firm size, offering size, and involvement of buyout specialists or management. Although earnings management has been used to explain post-issue long-term underperformance of IPOs and SEOs, our study shows that earnings management can explain post-offering returns of reverse LBOs, even in the absence of post-offering underperformance.
| Original language | English |
|---|---|
| Pages (from-to) | 407-438 |
| Number of pages | 32 |
| Journal | Journal of Financial and Quantitative Analysis |
| Volume | 41 |
| Issue number | 2 |
| DOIs | |
| Publication status | Published - 2006 Jun 1 |
Fingerprint
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics
Cite this
Earnings management and stock performance of reverse leveraged buyouts. / Chou, De Wai; Gombola, Michael; Liu, Feng Ying.
In: Journal of Financial and Quantitative Analysis, Vol. 41, No. 2, 01.06.2006, p. 407-438.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Earnings management and stock performance of reverse leveraged buyouts
AU - Chou, De Wai
AU - Gombola, Michael
AU - Liu, Feng Ying
PY - 2006/6/1
Y1 - 2006/6/1
N2 - This study provides further evidence of earnings management around security offerings. We find positive and significant discretionary current accruals coincident with offerings of reverse LBOs. Issuers in the most aggressive quartile of earnings management have a one-year aftermarket return that is between 15% and 25% less than the most conservative quartile. We also find a negative and significant relation between abnormal accruals and post-issue abnormal returns within the first year after the offering. The relation remains after controlling for book-to-market ratio, firm size, offering size, and involvement of buyout specialists or management. Although earnings management has been used to explain post-issue long-term underperformance of IPOs and SEOs, our study shows that earnings management can explain post-offering returns of reverse LBOs, even in the absence of post-offering underperformance.
AB - This study provides further evidence of earnings management around security offerings. We find positive and significant discretionary current accruals coincident with offerings of reverse LBOs. Issuers in the most aggressive quartile of earnings management have a one-year aftermarket return that is between 15% and 25% less than the most conservative quartile. We also find a negative and significant relation between abnormal accruals and post-issue abnormal returns within the first year after the offering. The relation remains after controlling for book-to-market ratio, firm size, offering size, and involvement of buyout specialists or management. Although earnings management has been used to explain post-issue long-term underperformance of IPOs and SEOs, our study shows that earnings management can explain post-offering returns of reverse LBOs, even in the absence of post-offering underperformance.
UR - http://www.scopus.com/inward/record.url?scp=33745322561&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=33745322561&partnerID=8YFLogxK
U2 - 10.1080/10584580600663144
DO - 10.1080/10584580600663144
M3 - Article
AN - SCOPUS:33745322561
VL - 41
SP - 407
EP - 438
JO - Journal of Financial and Quantitative Analysis
JF - Journal of Financial and Quantitative Analysis
SN - 0022-1090
IS - 2
ER -