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Earnings management and corporate spinoffs

Listed author(s):
  • Ying Lin

    ()

  • Kenneth Yung

    ()

Registered author(s):

    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. Copyright Springer Science+Business Media New York 2014

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    File URL: http://hdl.handle.net/10.1007/s11156-013-0372-x
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    Article provided by Springer in its journal Review of Quantitative Finance and Accounting.

    Volume (Year): 43 (2014)
    Issue (Month): 2 (August)
    Pages: 275-300

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    Handle: RePEc:kap:rqfnac:v:43:y:2014:i:2:p:275-300
    DOI: 10.1007/s11156-013-0372-x
    Contact details of provider: Web page: http://springer.com

    Order Information: Web: http://www.springer.com/finance/journal/11156/PS2

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