Loughborough University
Thesis-2018-Elrazaz.pdf (2.56 MB)

Do acquirers see through the numbers? Earnings management by UK takeover targets

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posted on 2019-04-16, 11:11 authored by Tariq Elrazaz
The objective of this thesis is to examine accrual and real earnings management in a sample of 131 UK publicly listed targets acquired over the period 1995-2012. Mergers and Acquisitions (M&As) are amongst the most significant investment decisions that firms make. Prior literature shows that earnings management around mergers and acquisitions can have a significant economic impact because of the associated wealth transfers among stakeholders. More importantly, acting on behalf of their shareholders or pursuing their self-interests, managers of both targets and acquirers may be equally motivated to manipulate earnings prior to an acquisition to generate higher gains for their shareholders or themselves. Building on the grounds of information asymmetry, agency conflicts, stewardship theory and the revelation principle, this thesis addresses the question whether takeover targets employ accrual and real earnings management in the periods prior to the announcement of a M&A. Additionally, this thesis examines whether UK acquirers are able to detect targets’ earnings management, and in response, adjust the acquisition premium paid downwards in order not to face the risk of overpayment. The research design for the first accrual-based earnings management study uses an aggregate accruals approach in estimating accrual earnings management as proxied by estimated abnormal accruals. [Continues.]



  • Business and Economics


  • Business


Loughborough University

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© Tariq Elrazaz

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This work is made available according to the conditions of the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International (CC BY-NC-ND 4.0) licence. Full details of this licence are available at: https://creativecommons.org/licenses/by-nc-nd/4.0/

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A Doctoral Thesis. Submitted in partial fulfilment of the requirements for the award of Doctor of Philosophy of Loughborough University.


  • en


Noel O’Sullivan

Qualification name

  • PhD

Qualification level

  • Doctoral

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