Earnings management and firm performance following open-market repurchases

• 成果类型: Article
• 署名作者: Gong, Guojin; Louis, Henock; Sun, Amy X.
• 署名单位: Pennsylvania Commonwealth System of Higher Education (PCSHE); Pennsylvania State University; Pennsylvania State University - University Park
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/j.1540-6261.2008.01336.x
• 发表日期: 2008
• 页码: 947-986
• 关键词: SIGNAL PRIVATE INFORMATION; FIXED-PRICE; institutional investors; STOCK REPURCHASES; DUTCH-AUCTION; tender offers; accruals; returns; OPTION; POWER

摘要

Both post-repurchase abnormal returns and reported improvement in operating performance are driven, at least in part, by pre-repurchase downward earnings management rather than genuine growth in profitability. The downward earnings management increases with both the percentage of the company that managers repurchase and CEO ownership. Pre-repurchase abnormal accruals are also negatively associated with future performance, with the association driven mainly by those firms that report the largest income-decreasing abnormal accruals. The study suggests that one reason firms experience post-repurchase abnormal returns is that post-repurchase realized earnings growth exceeds expectations formed on the basis of pre-repurchase deflated earnings numbers.