Location of Repository

Disclosure of profit forecasts during takeover bids

By Niamh Brennan


This thesis examines disclosure of 250 profit forecasts in 701 UK takeover bids in the period 1988 to 1992 against five research issues:\ud - Factors influencing disclosure of forecasts\ud - Influence of prevailing market expectations\ud - Effect of disclosure of forecasts on the outcome of bids\ud - Factors influencing disclosure content in forecasts\ud - Whether forecasts disclosed convey good news\ud Logit analysis and negative binomial regression are the two primary statistical techniques used to analyse the results.\ud Results show the domination of the takeover-context of the research. Two variables accounted for almost all the influence on disclosure of forecasts for both bidders and targets: bid horizon and type of bid. Probability of disclosure of a forecast is greater the shorter the bid horizon and during contested bids.\ud In addition to bid horizon and type of bid, for bidders, year, value of bid and purchase consideration were significant, and for targets value of bid and industry were significant in one of the two models estimated.\ud Evidence supporting the hypothesis that forecast disclosure is more likely when market expectations are out of line with actual results is provided. \ud There is some evidence that forecasts by targets affect the outcome of bids, but there is no such evidence for bidders.\ud Takeover-context variables and forecast-related variables were most relevant in determining disclosures in forecasts. Disclosure content in forecasts was significantly greater during contested bids, in voluntary forecasts and in longer period forecasts. Significantly more assumptions were disclosed by target forecasters and in longer horizon forecasts.\ud Evidence shows a tendency to disclose good news, with some disclosure of bad news. Good news forecasts are more likely during contested bids. Targets are more likely to disclose bad news forecasts, but when bidders disclose bad news it tends to be worse on average than targets' bad news

Topics: HG, HD
OAI identifier: oai:wrap.warwick.ac.uk:2353

Suggested articles



  1. (1980). A comparative analysis of forecast disclosing and non-disclosing firms. doi
  2. (1972). A profile of industrial acquisitions in doi
  3. (1991). Abandoned mergers and the market for corporate control. doi
  4. (1994). Accounting disclosure practices in the United States and the United Kingdom. doi
  5. (1990). Accounting method choice. Opportunistic behaviour, efficient contracting and information perspectives.
  6. (1992). Accounting policies and profit forecasts in
  7. (1984). Additional evidence on the information content of management earnings forecasts. doi
  8. (1986). Agency costs of free cash flow, corporate finance, and takeovers. doi
  9. (1980). Agency problems and the theory of the firm. doi
  10. (1984). Agency theory, managerial welfare, and takeover bid resistance. doi
  11. (1986). Alternative estimators in logistic regression when the data are collinear. doi
  12. (1985). An analysis of lease disclosure by Australian companies. doi
  13. (1991). An anatomy of the poison pill. doi
  14. (1971). An empirical analysis of the quality of corporate financial disclosure.
  15. (1983). An empirical analysis of the role of the medium of exchange in mergers. doi
  16. (1973). An empirical examination of the reliability of published predictions of future earnings.
  17. (1993). An empirical investigation of the extent of corporate financial disclosure in the oil and gas industry.
  18. (1983). An empirical investigation of the impact of `antitakeover' amendments on common stock prices. doi
  19. (1980). An empirical investigation of the voluntary disclosures of corporate earnings forecasts. doi
  20. (1983). Antitakeover charter amendments and stockholder wealth. doi
  21. (1989). Applied logistic regression. doi
  22. (1987). Attributes of news about firms: an analysis of firm-specific news reported in the Wall Street Journal Index. doi
  23. (1991). Auditor credibility and initial public offerings.
  24. (1989). Auditor reputation and the pricing of initial public offerings. doi
  25. (1981). Auditor size and audit quality. doi
  26. (1989). Avon Products trims forecast for '89 earnings. The Wall Street Journal,
  27. (1981). Bank annual report disclosure adequacy internationally. doi
  28. (1993). Bidder companies and defended bids: a test of Roll's hubris hypothesis. doi
  29. (1984). Bond raters' use of management financial forecasts: experiment in expert judgement.
  30. (1990). Capital markets and corporate control. doi
  31. (1988). Characteristics of targets of hostile and friendly takeovers. In: doi
  32. (1980). Company size and financial disclosure requirements with evidence from the segmental reporting issue. doi
  33. (1975). Company size, listed v unlisted stock and extent of financial disclosure. doi
  34. (1978). Comparative accuracy of management's annual earnings forecasts. doi
  35. (1988). Comparative dimensions of takeover regulation in
  36. (1982). Corporate financial reporting in New Zealand: an analysis of user preferences, corporate characteristics and disclosure practices for discretionary information. doi
  37. (1982). Corporate financial reporting: a methodological review of financial research. doi
  38. (1977). Corporate financial statements: a product of the market and political processes. doi
  39. (1976). Corporate forecasts of earnings per share and stock price behaviour: empirical tests. doi
  40. (1984). Corporate managers earnings forecasts and symmetrical adjustments of market expectations. doi
  41. (1991). Corporate mergers and shareholder wealth effects 1977-1986Accounting and doi
  42. (1961). Corporate reporting and investment decisions. doi
  43. (1994). Corporate takeover barriers: valuation and firm performance. doi
  44. (1994). Costs and benefits of business information disclosure.
  45. (1986). Defence strategies of listed companies under the takeover code. doi
  46. (1994). Defence strategies of target firms in UK contested takeover bids: a survey. Working paper 94/1,
  47. (1991). Defensive strategies of target companies in UK contested takeovers. doi
  48. (1982). Determinants of the accuracy of management forecasts of earnings.
  49. (1995). Differential information and the underpricing of initial public offerings: Australian evidence. doi
  50. (1993). Disclosure in Japanese corporate annual reports. doi
  51. (1976). Disclosure in published annual reports. doi
  52. (1989). Disclosure in the corporate annual reports of Swedish companies. doi
  53. (1985). Disclosure of nonproprietary information. doi
  54. (1993). Disclosure policies with multiple users. doi
  55. (1995). Disclosure policy choices of stressed firms in the UK. Working paper.
  56. (1986). Disclosure quality in governmental financial reports. doi
  57. (1988). Disclosure when the market is unsure of information endowment of managers. doi
  58. (1991). Disclosure, liquidity and the cost of capital. doi
  59. (1995). Discretionary disclosure and external financing.
  60. (1992). Discretionary disclosure of reserves by oil and gas companies: an economic analysis. doi
  61. (1983). Discretionary disclosure. doi
  62. (1989). Discussion of 'The valuation of initial public offerings'. doi
  63. (1981). Discussion of voluntary corporate disclosure: the case of interim reporting. doi
  64. (1995). Earnings disclosures and stockholder lawsuits. Working paper. doi
  65. (1985). Earnings volatility and voluntary management forecast disclosure. doi
  66. (1986). Econometric models based on count data: comparisons and applications of some estimators and tests. doi
  67. (1994). Efficient versus opportunistic choice of accounting procedures: corporate control contests.
  68. (1991). Empirical assessment of the impact of auditor quality on the valuation of new issues. doi
  69. (1990). Endogenous proprietary costs through firm interdependence. doi
  70. (1989). Evidence of informational asymmetries from management earnings forecasts and stock returns.
  71. (1986). Evidence on the incremental information content of additional firm disclosures made concurrently with earnings. doi
  72. (1995). Exchange of the United Kingdom and the Republic of Ireland Limited.
  73. (1990). Factors associated with the disclosure of managers' forecasts.
  74. (1973). Financial disclosure and entry to the European capital market. doi
  75. (1990). Financial disclosure policy in an entry game. doi
  76. (1976). Financial reporting practices: disclosure and comprehensiveness in an international setting. doi
  77. (1990). Forecast disclosure by small companies.
  78. (1985). Further evidence on the representativeness of management earnings forecasts.
  79. (1987). Gains to bidder firms in cash and securities transactions. doi
  80. (1989). Globalisation of stock markets and foreign listing requirements: voluntary disclosure by continental companies listed on the London Stock Exchange. doi
  81. (1981). Good news and bad news: representation theorems and applications. doi
  82. (1979). How reliable are profit forecasts?
  83. (1980). Improving quality of corporate financial disclosure. doi
  84. (1995). Industry-wide disclosure dynamics. doi
  85. (1977). Information asymmetries, financial structure and financial intermediation. doi
  86. (1992). Information disclosure strategy. doi
  87. (1989). Information disclosure, method of payment and takeover premiums: Public and private tender offers in France. doi
  88. (1990). Information quality and discretionary disclosure. doi
  89. (1986). Information quality and the valuation of news issues. doi
  90. (1993). Initial public offerings on the unlisted securities market: the impact of professional advisors. doi
  91. (1983). Innovation and communication: signalling with partial disclosure. doi
  92. (1993). International capital market pressures and voluntary disclosure decisions by US, UK and continental European multinationals. Working paper.
  93. (1984). Learning from the field A guide from experience. Beverly Hills:
  94. (1982). Limit pricing and entry under incomplete information: an equilibrium analysis. doi
  95. (1991). Making corporate reports valuable: a survey of corporate reporting practices by major UK companies. Glasgow: Institute of Chartered Accountants of Scotland.
  96. (1970). Management and merger activity. doi
  97. (1989). Management entrenchment: the case of manager-specific investments. doi
  98. (1988). Managerial competition, information costs, and corporate governance: the use of accounting performance measures in proxy contests. doi
  99. (1974). Market signalling: information transfer in hiring and related processes Cambridge, MA:
  100. (1988). Means of payment in takeovers: Results for the United Kingdom and the United States. In: Corporate takeovers: Their causes and consequences. doi
  101. (1972). Mergers and takeovers: The financial characteristics of companies involved.
  102. (1991). Nondisclosure and adverse disclosure as signals of firm values. doi
  103. (1979). On financial contracting: an analysis of bond covenants.
  104. (1993). On the optimality of public signals in the presence of private information.
  105. (1979). On the theory of market information efficiency. doi
  106. (1985). Optimal release of information by firms. doi
  107. (1988). Poison pill securities: Stockholder wealth, profitability, and ownership structure.
  108. (1988). Political costs and an intraperiod accounting choice for export tax credits. doi
  109. (1986). Positive accounting theory. Englewood Cliffs,
  110. (1986). Predicting takeover targets: A methodological and empirical analysis. doi
  111. (1989). Preemptive bidding and the role of the medium of exchange in acquisitions. doi
  112. (1973). Problems in interpreting prospectus profit forecasts. doi
  113. (1987). Product differentiation in auditing: a study of auditor choice in the market for unseasoned new issues. Vancouver, BC: Canadian Certified General Accountants' Research Foundation.
  114. (1975). Profit forecast disclosure: the effect on managerial behaviour. doi
  115. (1972). Profit forecasts in bid situations.
  116. (1986). Proprietary and nonproprietary disclosures. doi
  117. (1991). Prospectus earnings forecasts and the pricing of new issues on the unlisted securities market. doi
  118. (1991). Public disclosure and the structure of private information markets. doi
  119. (1990). Qualitative evaluation and research methods (2nd edition). doi
  120. (1980). Raising finance and firms' corporate reporting policies. doi
  121. (1995). Recent developments in count data modelling: theory and application. doi
  122. (1977). Report of advisory committee on corporate disclosure. doi
  123. (1973). Reporting on forecasts: a United Kingdom perspective.
  124. (1982). Response effects of `role-restricted' characteristics of the interviewer in
  125. (1985). Security analyst multi year earnings forecasts and the capital market.
  126. (1974). Selected items of information and their disclosure in annual reports.
  127. (1994). Self-enforcing voluntary disclosures. doi
  128. (1994). Shareholder litigation and corporate disclosures. doi
  129. (1989). Shareholder wealth effects of corporate takeovers: The UK experience 1955-1985. doi
  130. (1987). Shark repellents and stock prices. The effects of antitakeover amendments since doi
  131. (1982). Signalling and the valuation of unseasoned new issues. doi
  132. (1986). Signalling by direct disclosure under asymmetric information. doi
  133. (1987). Signalling, agency theory and accounting policy choice. doi
  134. (1994). Some evidence on the news content of preliminary earnings estimates.
  135. (1983). Standstill agreements, privately negotiated stock repurchases, and the market for corporate control. doi
  136. (1989). State corporation laws and shareholders: the recent experience. doi
  137. (1978). Statistical information and extensions in European financial disclosure.
  138. (1993). Statistical tests. doi
  139. (1984). Stock issues and investment policy when firms have information that investors do not have. doi
  140. (1971). Survey methods in social investigation. doi
  141. (1994). Synergy or new information as a source of wealth changes in acquisitions: the case of abandoned bids. doi
  142. (1991). Takeover defence strategies.
  143. (1995). Takeover prediction in the UK: A multilogit approach. Working paper. The Queen's
  144. (1991). Takeover threats, antitakeover amendments and stock price reaction. doi
  145. (1978). The abandonment of major mergers in the U. doi
  146. (1982). The accuracy of chairmen's non-quantified forecasts: an exploratory study.
  147. (1972). The accuracy of company profit forecasts.
  148. (1979). The accuracy of management forecasts and forecasts of simple alternative models.
  149. (1992). The accuracy of profits forecasts in initial public offering prospectuses. doi
  150. (1976). The apparent effects of profit forecast disclosure on managerial behaviour: an empirical examination. doi
  151. (1983). The causes and consequences of abandoned mergers. doi
  152. (1985). The characteristics of takeover targets: -q and other measures. doi
  153. (1993). The city code on takeovers and mergers. 4th Ed. London: The Panel on Takeovers and Mergers. doi
  154. (1982). The demand for external auditing: size, debt and ownership influences. doi
  155. (1987). The derived demand for consolidated financial reporting. doi
  156. (1988). The determinant and effects of actual, abandoned and contested mergers. doi
  157. (1989). The determinants of accuracy of management earnings forecasts: a New Zealand study.
  158. (1983). The development of a positive theory of corporate management's role in external financial reporting.
  159. (1979). The disclosure of information by companies. doi
  160. (1983). The economic consequences of accounting choice: implications of costly contracting and monitoring. doi
  161. (1992). The economics of accounting policy choice. doi
  162. (1993). The effect of firms' financial disclosure strategies on stock prices.
  163. (1988). The effect of poison pill securities on shareholder wealth. doi
  164. (1989). The effects of financial disclosure levels on firms' choices among alternative foreign exchanges. doi
  165. (1979). The extent and causes of voluntary disclosure of financial information in three European capital markets: an exploratory study.
  166. (1984). The extent of voluntary disclosure in corporate annual reports and its association with security risk measures. doi
  167. (1981). The financial characteristics of firms and theories of merger activity. doi
  168. (1991). The impact of costly information interpretation on firm disclosure decisions. doi
  169. (1992). The impact of size, stock market listing and industry type on disclosure in annual reports of Japanese listed corporations. doi
  170. (1981). The informational role of warranties and private disclosure about product quality. doi
  171. (1990). The management of corporate financial disclosure: opportunism, ritualism, policies and processes. doi
  172. (1992). The management of financial disclosure: theory and perspectives. Vancouver, BC: Canadian Certified General Accountants' Research Foundation.
  173. (1970). The market for 'lemons'. Quality uncertainty and the market mechanism. doi
  174. (1989). The market for corporate control and its implications for accounting policy choice.
  175. (1983). The market for corporate control: the scientific evidence. doi
  176. (1990). The prediction of takeover targets in the U. K. by means of multiple discriminant analysis. doi
  177. (1974). The publication of forecasts: an experiment. doi
  178. (1994). The relationship between the comprehensiveness of corporate annual reports and firm characteristics in Spain. doi
  179. (1992). The reliability of perception-based annual report disclosure studies. doi
  180. (1978). The representativeness of management earnings forecasts.
  181. (1993). The stock price effects of alternative types of management earnings forecasts.
  182. (1979). The time series of earnings for forecast reporting and nonreporting firms. doi
  183. (1991). The use of disclosure indices in accounting research: a review article. doi
  184. (1992). The voluntary inclusion of earnings forecasts in IPO prospectuses. doi
  185. (1994). The voluntary inclusion of forecasts in the MD&A section of annual reports. doi
  186. (1991). The voluntary presentation of value added statements in Australia: a political cost perspective. doi
  187. (1976). Theory of the firm: managerial behaviour, agency costs and ownership structure. doi
  188. (1995). To warn or not to warn: management disclosures in the face of an earnings surprise.
  189. (1978). Towards a positive theory of the determination of accounting standards.
  190. (1988). Underpricing of new issues and the choice of auditor as a signal of investment banker reputation.
  191. (1994). Unregulated segmental reporting: Australian evidence. doi
  192. (1981). Voluntary corporate disclosure: the case of interim reporting. doi
  193. (1989). Voluntary disclosure credibility and securities prices: evidence from management earnings forecasts, doi
  194. (1992). Voluntary disclosure of financial segment data: New Zealand evidence. doi
  195. (1990). Voluntary disclosure with a strategic opponent. doi
  196. (1990). Voluntary disclosure.
  197. (1987). Voluntary financial disclosure by Mexican corporations.
  198. (1990). Voluntary forecast disclosure, non-disclosure and stock prices. doi
  199. (1989). Voluntary information disclosure and the British multinationals: corporate perceptions of costs and benefits. In: International pressures for accounting change.
  200. (1992). Voluntary semi-annual earnings disclosures, earnings volatility, unexpected earnings and firm size. doi
  201. (1986). Why do managers voluntarily release earnings forecasts. doi
  202. (1994). Why firms voluntarily disclose bad news. doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.