Abstract
In this study we examine whether firms manage earnings before pursuing corporate spinoffs. Using a sample of 226 completed spinoffs between 1985 and 2005, we find strong evidence of pre-spinoff earnings management among parent firms involved in non-focus-increasing spinoffs. We also find higher levels of earnings management among parent firms that have a higher level of information asymmetry prior to spinoff announcements. Our regression results show a significant negative relation between income-increasing earnings management and the announcement period returns for non-focus-increasing spinoffs. In addition, a significant positive relation is found between income-increasing earnings management and the announcement period returns for focus-increasing spinoffs. The results suggest that income-increasing earnings management sends out negative signals about non-focus-increasing spinoffs but positive signals about focus-increasing spinoffs. © 2013 Springer Science + Business Media New York.
Recommended Citation
Lin, Y. C., & Yung, K. (2014). Earnings Management and Corporate Spinoffs. Review of Quantitative Finance and Accounting, 43(2), pp. 275-300. Springer.
The definitive version is available at https://doi.org/10.1007/s11156-013-0372-x
Department(s)
Economics
Keywords and Phrases
Accounting accruals; Corporate spinoff; Divestiture; Earnings management; Focus
International Standard Serial Number (ISSN)
1573-7179; 0924-865X
Document Type
Article - Journal
Document Version
Citation
File Type
text
Language(s)
English
Rights
© 2024 Springer, All rights reserved.
Publication Date
01 Jan 2014
