Acquisition profitability and timely loss recognition

• 成果类型: Article
• 署名作者: Francis, Jere R.; Martin, Xiumin
• 署名单位: Washington University (WUSTL); University of Missouri System; University of Missouri Columbia
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2009.09.003
• 发表日期: 2010
• 关键词: investment opportunity set; accounting conservatism; AGENCY COSTS; asymmetric timeliness; corporate governance; earnings; INFORMATION; OWNERSHIP; dividend; firm

摘要

We investigate if timely loss recognition is associated With acquisition-investment decisions. Using a Basu (1997) piece-wise linear regression model, we find that firms with more timely incorporation of economic losses into earnings make more profitable acquisitions, measured by the bidder's announcement returns and by changes in post-acquisition operating performance. These firms are also less likely to make post-acquisition divestitures (consistent with better ex ante investment decisions), but act more quickly to divest. We also find that the positive association between timely loss recognition and acquisition profitability is more pronounced for firms with higher ex ante agency costs. (C) 2009 Elsevier B.V. All lights reserved.