This study tests the hypothesis that managers of firms that are targets of takeovers systematically increase reported earnings in the quarters immediately preceding and following initiation of the takeover attempt. Using both a modified version of the Jones method and the DeAngelo method, discretionary accounting accruals are examined for a sample of 100 firms that were targets of tender offers between 1985 and 1989, inclusive, and for a control group of nontargets. Results for the quarter ended prior to initiation support the hypothesis. Additional tests performed on the sub-samples of hostile and friendly takeover targets indicate that the results obtained for the sample as a whole are primarily due to the hostile takeover targets. No evidence of earnings management is found in the quarter ended subsequent to initiation.
The objective of this study is to examine whether high surplus free cash flow is related to earnings management. This study hypothesizes managers of high surplus free cash flow companies have incentive to engage in earnings management. However, earnings management occurs less frequently when the audit committee is more independent. Independent audit committees provide an effective monitoring over earnings management practices. This study expects that the positive relationship between surplus free cash flow and earnings management is moderated by independent audit committee. Using a sample of 155 companies listed on the main board of Bursa Malaysia in 2001, this study obtains empirical evidence consistent with the prediction in all hypotheses. This study shows that independent audit committee help companies with high surplus free cash flow to reduce income increasing earnings management practices.
Berzelius failed to make use of Faraday's electrochemical laws in his laborious determination of equivalent weights.