Earnings Management Preceding Management Buyouts
| Author: | Bc. Jakub Bobysud |
|---|---|
| Year: | 2021 - summer |
| Leaders: | Jiří Novák M.Sc., Ph.D., Deloitte Corporate Chair |
| Consultants: | |
| Work type: | Bachelors |
| Language: | English |
| Pages: | 47 |
| Awards and prizes: | |
| Link: | https://ckis.cuni.cz:443/F/?func=direct&doc_number=002447993&local_base=CKS01&format=999 |
| Abstract: | This thesis examines the quality of accounting information in years preceding management buyouts (MBOs). In setting of MBOs management has both the capacity and strong economic incentives to manage earnings or revenues downwards due to potential capitalization on discount from acquisition values paid. Yet factors deterring earnings management such as frequent litigation by public shareholders following MBOs are also in place. The past research on the presence of earnings management before management buyouts is split which motivates a return to this topic using a new methodology – discretionary conditional revenue model. This model seems to fare better at both specificity and sensitivity of earnings management detection as compared to previous models attempting earnings detection and should provide a valuable insight into the problem. Moreover, motivation and execution of tests related to potential impact of undervaluation and operational underperformance of industry peers is presented in the thesis. The results indicate no evidence of pre-MBO earnings management as well as insignificant impact of both undervaluation and underperformance in tests of earnings management. |
