Managers’ Incentives to Manipulate Earnings in Management Buyout Contests: An Examination of How Corporate Governance and Market Mechanisms Mitigate Earnings Management

In an MBO contest, managers offer to buy the firm from public shareholders at a premium to the current market price and thus have incentives to buy the firm “cheap.” Prior studies have found evidence that managers, on average, manipulate earnings downward prior to an MBO offer in an attempt to convince shareholders that their offer is fair. We extend this finding by attempting to explain the substantial cross sectional variation in the degree of manipulation across firms reported in these earlier studies. We find that boards with more independent directors and higher levels of incentive based compensation for the CEO act to discourage such manipulation. Additionally, our results show that some shareholders, minority and preexisting large outside blockholders, appear to be misled by the manipulation. However, new blockholders that acquire large shareholdings in the year before the offer are not. We also discover that managers are more likely to revise their bid upwards when the manipulation is most severe and that these new blockholders put pressure on managers to make these revisions. Finally, we investigate whether the manipulation has an impact on the final buyout contest outcome. We find that downward manipulation does not prevent managers from retaining control of the firm; however, they pay a higher premium

Do volcanoes trigger climate change?

This is the final version of the article. Available from NERC via the URL in this record.Huge volcanic eruptions may have pushed the climate from global warming to global cooling 16 million years ago. The theory could have big implications for efforts to slow climate change by fertilising plankton in the ocean. Sev Kender, Victoria Peck and John Smellie explain

Millennial-scale surface and subsurface paleothermometry from the northeast Atlantic, 55-8 ka BP

We present high-resolution records of upper ocean temperatures derived from Mg/Ca ratios of surface-dwelling Globigerina bulloides and subsurface-dwelling Neogloboquadrina pachyderma sinistral and the relative abundance of N. pachyderma sinistral for the period 55-8 ka BP from NE Atlantic sediment core MD01-2461. Millennial-scale temporal variability and longer-term trends in these records enable us to develop a detailed picture of past ocean conditions such as a weakening of thermocline intensity from marine isotope stage 3 (MIS 3) to the last glacial maximum (LGM). The correspondence of all temperature proxies and convergence of paired oxygen isotope (δ18O) records from both planktonic species implies a breakdown in the thermocline and year-round mixing of the upper water column through the LGM, perhaps related to decreasing insolation and additional cooling in association with the expansion of the circum-North Atlantic ice sheets. Millennial-scale divergence in surface and subsurface temperatures and δ18O across the last glacial correspond to meltwater release and the development of a strong halocline associated with both Heinrich (H) events and instabilities of the NW European ice sheet. During such episodes, G. bulloides Mg/Ca appears to record ambient, even warming summer sea surface temperatures across H events while the other proxies record maximum cooling

Measurement of the ΔS=-ΔQ Amplitude from K_(e3)^0 Decay

We have measured the time distribution of the π^+e^-ν and π^-e^+ν modes from initial K^0's in a spark-chamber experiment performed at the Bevatron. From 1079 events between 0.2 and 7 K_S^0 lifetime, we find ReX=-0.069±0.036, ImX=+0.108_(-0.074)^(+0.092). This result is consistent with X=0 (relative probability = 0.25), but more than 4 standard deviations from the existing world average, +0.14 -0.13i

Warming by 1°C drives species and assemblage level responses in Antarctica’s marine shallows

Forecasting assemblage-level responses to climate change remains one of the greatest challenges in global ecology [1 , 2 ]. Data from the marine realm are limited because they largely come from experiments using limited numbers of species [3 ], mesocosms whose interior conditions are unnatural [4 ], and long-term correlation studies based on historical collections [5 ]. We describe the first ever experiment to warm benthic assemblages to ecologically relevant levels in situ. Heated settlement panels were used to create three test conditions: ambient and 1°C and 2°C above ambient (predicted in the next 50 and 100 years, respectively [6]). We observed massive impacts on a marine assemblage, with near doubling of growth rates of Antarctic seabed life. Growth increases far exceed those expected from biological temperature relationships established more than 100 years ago by Arrhenius. These increases in growth resulted in a single “r-strategist” pioneer species (the bryozoan Fenestrulina rugula) dominating seabed spatial cover and drove a reduction in overall diversity and evenness. In contrast, a 2°C rise produced divergent responses across species growth, resulting in higher variability in the assemblage. These data extend our ability to expand, integrate, and apply our knowledge of the impact of temperature on biological processes to predict organism, species, and ecosystem level ecological responses to regional warming