547 research outputs found
Identifying the Nature and Value of Expected Merger Synergies
Using a large sample of post-2001 mergers, we show that three components of targets’ intellectual property account for 25% to 33% of merger value creation. In particular, we show that R&D, Technology, and Trademarks generate greater synergies than acquired net tangible assets and goodwill. We also find that acquiring targets’ customer bases is associated with lower synergies and that acquirers overpay for goodwill. Our findings are robust to using conventional and novel wealth effect estimates. They suggest that information about the economic value of acquired assets drawn from price allocation disclosures enables researchers to simultaneously study multiple sources of synergy
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The diminished effect of index rebalances
The author revisits the strategy of trading S&P 500 index re-compositions under the pre- and post-crisis financial environments, proving that the return structure has
significantly changed. The results show for the first time, that there are currently no tradable abnormal returns between announcement and event dates in the post-crisis
sample period, indicating smoother rebalancing mechanisms by bank’s client facing desks and better services for passive end-investors. The newly added firms inflate the
S&P 500 index by less than 10 basis points per year. The results could be attributed to improved execution algorithms used by the banks, and potentially to the new
regulatory reforms in the sector, which prevents financial institutions from taking large trading positions with their balance sheets
Open Problems on Central Simple Algebras
We provide a survey of past research and a list of open problems regarding
central simple algebras and the Brauer group over a field, intended both for
experts and for beginners.Comment: v2 has some small revisions to the text. Some items are re-numbered,
compared to v
Applying Benford’s law to detect accounting data manipulation in the banking industry
We utilise Benford’s Law to test if balance sheet and income statement data broadly used to assess bank soundness were manipulated prior to and also during the global financial crisis. We find that all banks resort to loan loss provisions to manipulate earnings and income upwards. Distressed institutions that have stronger incentives to conceal their financial difficulties resort additionally to manipulating loan loss allowances and non-performing loans downwards. Moreover, manipulation is magnified during the crisis and expands to encompass regulatory capital
Auditor Change Disclosures as Signals of Earnings Management and Risk
Auditor resignations are considered more negative signals than auditor dismissals, but firms’ self-reported distinction between the two may not offer a complete or reliable representation of the nature of the auditor change. 8-K regulations require the disclosure of the adjournment of an audit engagement even if a successor auditor has not yet been named. In compliance with this requirement, some firms file two 8-k’s related to the same auditor change. Exploiting these dual 8-K filings, we create a new measure of the nature of auditor changes and show that 1) both self-reported auditor resignations and dual 8-K filings are related to measures of earnings management and risk; and 2) auditor changes identified as both self-reported resignations and dual 8-K filings are associated with the most negative economic implications (as reflected by the likelihood of financial statement manipulation and bankruptcy risk). We suggest that dual 8-K filings and self-reported resignations are complementary negative signals each capturing unique dimensions of the underlying economic factors
Refractive error characteristics in patients with congenital blepharoptosis before and after ptosis repair surgery
International Financial Reporting Standards and Earnings Quality: The Myth of Voluntary vs. Mandatory Adoption
The Screening Effect of the Private Securities Litigation Reform Act
Prior research shows that the PSLRA increased the significance of merit-related factors, such as the presence of an accounting restatement or insider selling, in determining the incidence and outcomes of securities fraud class actions. (Johnson, Nelson, and Pritchard, 2007). This result, however, is consistent with two possible hypotheses. First, the PSLRA may have reduced solely the incidence of non-meritorious litigation. Second, the PSLRA may have changed the definition of merit, effectively precluding claims that would have survived and produced a settlement pre-PSLRA. This paper tests these alternative hypotheses. We find that pre-PSLRA claims that settled for nuisance value would be less likely to be filed under the PSLRA regime. We also find, however, that pre-PSLRA non-nuisance claims would be less likely to be filed post-PSLRA period. The latter result, which we refer to as the screening effect, is particularly pronounced for claims lacking obvious hard evidence indicia of fraud (an accounting restatement or an SEC investigation). This screening effect is stronger if the claims also lacked evidence of abnormal insider trading. By contrast, we find that pre-PSLRA claims with hard evidence or abnormal insider trading would be no less likely to be filed in the post-PSLRA period. We also examine the likelihood of settlement for pre-PSRLA claims if they had been filed in the post-PSLRA period, and find a similar screening effect for case outcomes. We conclude that Congress effectively changed the definition of merit in adopting the PSLRA, discouraging suits that would have produced a non-nuisance outcome prior to the law’s enactment
Predicting Extreme Returns and Portfolio Management Implications
We consider which readily observable characteristics of individual stocks (e.g., option implied volatility, accounting data, analyst data) may be used to forecast subsequent extreme price movements. We are the first to explicitly consider the predictive influence of option implied volatility in such a framework, which we unsurprisingly find to be an important indicator of future extreme price movements. However, after controlling for implied volatility levels, other factors, particularly firm age and size, still have additional predictive power of extreme future returns. Furthermore, excluding predicted extreme return stocks leads to a portfolio that has lower risk (standard deviation of returns) without sacrificing performance
The Role of Information and Financial Reporting in Corporate Governance and Debt Contracting
We review recent literature on the role of financial reporting transparency in reducing governance-related agency conflicts among managers, directors, and shareholders, as well as in reducing agency conflicts between shareholders and creditors, and offer researchers some suggested avenues for future research. Key themes include the endogenous nature of debt contracts and governance mechanisms with respect to information asymmetry between contracting parties, the heterogeneous nature of the informational demands of contracting parties, and the heterogeneous nature of the resulting governance and debt contracts. We also emphasize the role of a commitment to financial reporting transparency in facilitating informal multiperiod contracts among managers, directors, shareholders, and creditors
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