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    When do targets' past financial results matter most to acquirers? The role of disruption of targets' existing operations

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    No. of downloads: 652

    Date
    2014
    Author
    Rabier, MaryJane Raffaella
    Advisor
    Kimbrough, Michael D
    DRUM DOI
    https://doi.org/10.13016/M2PC8P
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    Abstract
    A target's past earnings and past earnings quality are informative about the performance of its stand-alone operations while its book value is informative about its adaptation value, which is the potential value from alternative uses of its resources. The information in past earnings and past earnings quality about a target's stand-alone operations is likely to be more important to acquirers that intend to keep the target's operations intact post-merger while the information in book value about its adaptation value is likely to be more important to acquirers that anticipate significant disruption of the target's operations. Using acquirer industry classification and a self-constructed index as alternative approaches to measuring anticipated disruption of target operations, I find evidence consistent with these predictions. Specifically, I find that acquirers assign greater discounts to targets' pre-merger earnings performance and pre-merger earnings quality in setting their bids as anticipated disruption of targets' operations increases. In addition, acquirers place greater weight on targets' pre-merger book values in setting their bids as anticipated disruption increases. These findings provide important insights into the conditions under which particular types of accounting information are most useful in the merger context.
    URI
    http://hdl.handle.net/1903/15868
    Collections
    • Accounting & Information Assurance Theses and Dissertations
    • UMD Theses and Dissertations

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    DRUM is brought to you by the University of Maryland Libraries
    University of Maryland, College Park, MD 20742-7011 (301)314-1328.
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