Accounting Theses and Dissertations

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Browsing Accounting Theses and Dissertations by Subject "Accounting"

Now showing 1 - 7 of 7
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    Accounting disclosure quality and synergy gains: Evidence from cross-border mergers and acquisitions
    (University of Oregon, 2009-06) Eiler, Lisa Ann
    In this dissertation, I investigate how cross-country differences in regulatory environments affect the value and distribution of gains in cross-border acquisitions. I focus on how pre-acquisition strategies to reduce the valuation discount arising from weak regulatory environments affect the value and distribution of gains between acquiring and target firms. The two specific strategies I examine are cross-listing and voluntarily adopting International Financial Reporting Standards (IFRS). I compare the value and distribution of synergy gains for target firms from weak regulatory environments that have cross-listed or adopted IFRS (i.e., "strategic firms") to (1) target firms in similar countries that have not done so (i.e., "non-strategic firms") and (2) target firms in strong regulatory environment countries. For the first group, I expect lower total synergy gains and merger premia in acquisitions involving strategic target firms. However, I expect higher total valuation gains (i.e., the merger premium plus the increase in value from the strategy) for strategic firms. For the second comparison group, I expect higher total synergy gains and merger premia in acquisitions involving strategic firms relative to firms from strong regulatory environments. I test my predictions on a sample of cross-border acquisitions completed in 26 countries between 1995-2007. In acquisitions involving target firms from weak regulatory environments, I find no evidence that either the total synergy gain or merger premium are smaller for strategic firms. In fact, I find some evidence that the total synergy gains are higher for strategic firms relative to non-strategic firms. I find some evidence of higher total valuation gains for cross-listed firms, consistent with my hypothesis. For the second comparison group, I find no evidence that either the total synergy gain or merger premium are higher for strategic firms. By examining cross-border acquisitions, my research provides evidence on an increasingly important and economically significant type of foreign direct investment. I relate literature investigating the determinants and distribution of merger synergies to literature analyzing methods to eliminate cross-country valuation discounts. Therefore, my research makes an important contribution by providing insights beyond identifying which party captures synergy gains in cross-border acquisitions.
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    Audit committee accounting expertise and changes in financial reporting quality
    (University of Oregon, 2009-06) Rich, Kevin T.
    In this dissertation,I examine whether financial reporting quality increases following the appointment of an accounting expert to the audit committee. Prior literature documents positive cross-sectional associations between maintaining an accounting expert on the audit committee and financial reporting quality. Although this suggests that accounting expertise enhances the quality of a firm's financial reports, it is unclear whether financial reporting quality improves after appointing an accounting expert. Additionally, I explore how the strength of alternative governance provisions and the current expertise of the audit committee influence relations between appointing an accounting expert and changes in financial reporting quality. I hypothesize that accounting experts possess the financial backgrounds needed to detect accounting manipulations and the reputational capital to warrant actions that limit exposure to financial reporting failures. Therefore, I predict that newly appointed accounting experts have the ability and incentive to strengthen financial reporting systems and increase the quality of financial reports. Furthermore, I predict that incremental improvements in reporting quality following the appointment of an accounting expert are larger for strong governance firms because they possess the infrastructure necessary to act on audit committee recommendations and for firms with no prior accounting expertise because of opportunities for new accounting critiques by financially minded individuals. I test these predictions on a sample of 1,590 audit committee appointments between 2003 and 2005. Overall, I do not find empirical evidence of a change in financial reporting quality following the appointment of an audit committee accounting expert. However, I find that firms with strong governance that appoint an accounting expert experience larger post-appointment improvements in reporting quality than do firms with weak governance, as highlighted by more income-decreasing discretionary accruals, larger increases in earnings response coefficients, and higher quality accruals. Additionally, my evidence suggests that strong governance firms appointing their first accounting expert increase their reporting quality following the appointment. Therefore, my results imply that accounting expertise complements other governance mechanisms involved in financial monitoring. Overall, I provide evidence regarding the audit committee's influence over financial reporting and the conditions associated with effective use of accounting expertise.
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    Book-tax differences and earnings growth
    (University of Oregon, 2009-06) Jackson, Mark, 1963-
    I examine the relation between book-tax differences (BTDs) and earnings growth. Because financial accounting rules afford managers more flexibility and discretion in reporting than tax accounting rules, prior studies suggest that large differences between book and taxable income indicate lower quality (or less persistent) earnings. Lev and Nissim and Hanlon provide evidence that BTDs contain information about future firm performance, but the nature of the causality in this relation is not clear. While BTDs could proxy for earnings quality, they may also reveal underlying economic events or management's private information about future performance or simply predict future reversals in effective tax rates. I divide total BTDs into their measurable components: temporary (deferred taxes) and non-temporary (permanent differences and tax accruals), and test their relation with the components of net income changes: pretax earnings changes and tax expense changes. I hypothesize that the non-temporary component of BTDs is negatively related to future changes in tax expense, whereas the temporary component of BTDs is negatively related to changes in future pretax earnings. I also examine the maintained hypothesis that the lower earnings growth for large BTD firms is due to earnings management. I use various proxies from prior literature to identify firms potentially managing earnings and test whether the presence or absence of suspected earnings management activity alters the relation between BTDs and earnings changes. My results provide compelling evidence that permanent BTDs are related only to future changes in tax expense, and temporary BTDs are related to changes in pretax earnings. These results are robust to multiple sensitivity analyses, including a replication of the sample and methodology of Lev and Nissim. The results also hold in the case of firms not suspected of earnings management. In fact, 1 find only limited evidence that the results are stronger in the presence of earnings management. Overall, my study suggests that it is only the temporary component of BTDs that is related to future firm performance, with non-temporary differences being related to future tax expense changes, and that these results are primarily due to underlying economic factors, not earnings management.
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    Do managers alter the tone of their earnings announcements around stock option grants and exercises?
    (University of Oregon, 2009-06) Tama-Sweet, Isho, 1973-
    In this dissertation I investigate whether managers alter the linguistic tone of their earnings announcements to increase the value of their stock options. Empirical research finds evidence that managers use optimistic tone to signal future firm performance. However, prior literature also finds a positive relation between optimistic tone in earnings announcements and short-window abnormal returns. The market reaction to optimistic tone suggests that managers can profit from using pessimistic tone to lower the firm's stock price prior to option grants and optimistic tone to increase the stock price prior to option exercises. I hypothesize that managers adjust the tone of their earnings announcements to increase the value of their stock options. In addition, I hypothesize that managers will alter the tone to increase option payouts when the costs of doing so (proxied by litigation risk) are low and when the financial reporting incentives to do so (proxied by earnings management) are high. I test these predictions using 17,211 firm-quarter observations from 1998-2006. In my tests I regress the tone of the earnings announcement on its known determinants and indicators for a stock option grant or exercise shortly following the announcement. I do not find evidence that managers, on average, alter the tone of earnings announcements prior to option grants or exercises. However, I find that managers decrease optimistic tone prior to option grants when they also record low discretionary accruals, which suggests that altering tone and managing earnings are complementary strategies to move stock price. I also find that managers increase optimistic tone prior to option exercises when litigation risk is low, but decrease optimistic tone prior to option exercises when litigation risk is high. Further analysis indicates the litigation risk results hold only after the Sarbanes-Oxley Act of 2002. Overall, my evidence suggests that managers increase optimistic tone prior to option exercises except when a high threat of litigation constrains such opportunism. When managers do alter tone, the average financial gain is small relative to their total compensation.
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    Do Managers Respond to Tax Avoidance Incentives by Investing in the Tax Function? Evidence from Tax Departments
    (University of Oregon, 2021-04-27) Li, Zhongyang (John); Guenther, David
    While prior literature examines the role of incentives in motivating top managers to engage in corporate tax avoidance, there is little evidence on the specific actions that managers take in response to these incentives. Motivated by the premise that a manager can influence a firm’s tax activities by emphasizing the tax function, I investigate whether four specific tax avoidance incentives studied in prior literature (financial constraints, equity risk incentives, hedge fund interventions, and analyst cash flow forecasts) induce managers to make investments in the firm’s tax department. Using a dataset of tax employees collected from the website LinkedIn, I find evidence that each incentive is significantly associated with an increase in the number of employees within the tax department. This association is stronger among higher ranked employees and employees with prior tax department experience. In supplementary analyses, I find that some incentives also induce managers to pay higher tax fees to the firm’s auditor and engage in tax lobbying. Overall, my findings are consistent with the premise that managers invest resources in the tax function when incentivized to avoid taxes. My study also provides assurance that the association between incentives and effective tax rates documented in prior studies is reflective of intentional tax avoidance behavior.
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    The Information Content of Risk Factor Disclosures in Quarterly Reports
    (University of Oregon, 2011-06) Filzen, Joshua James, 1981-
    I examine whether recently required Risk Factor update disclosures in quarterly reports provide investors with timely information regarding potential future negative outcomes. Specifically, I examine whether Risk Factor updates in 10-Q filings are associated with negative abnormal returns at the time the updates are disclosed and whether quarterly updates are followed by negative earnings shocks. I find that firms presenting updates to their Risk Factor disclosures have lower abnormal returns around the filing date of the 10-Q relative to firms without updates, although I find little evidence to suggest that the strength of this relationship is positively associated with the level of information asymmetry between managers and investors. Using analyst forecasts and a cross-sectional model to forecast earnings as measures of expected earnings prior to the release of Risk Factor updates, I find that firms with updates to their Risk Factors section have lower future unexpected earnings. I also find that firms with Risk Factor updates are more likely to experience future extreme negative earnings forecast errors. These findings suggest that the recent disclosure requirement mandated by the SEC was successful in generating timely disclosure of bad news. However, I also find some evidence that firms with updates to their Risk Factors section have stronger future positive performance shocks relative to firms without Risk Factor Updates, consistent with firms that disclose Risk Factor updates also having greater upside potential.
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    Why Do Acquirers Manage Earnings Before Stock-for-Stock Acquisitions?
    (University of Oregon, 2011-06) Tran, Nam D.
    In this dissertation, I examine whether high disclosure costs explain why acquirers manage earnings before stock-for-stock acquisitions. Because stock-for-stock acquirers use their own shares to pay for targets' shares, stock-for-stock acquirers have incentives to manage earnings in order to boost their stock prices. I show that high disclosure costs lead to an equilibrium in which acquirers engage in earnings management in a manner consistent with target firms' expectations. As a result, I hypothesize that stock-for-stock acquirers with high disclosure costs are more likely to manage earnings before the acquisition than stock-for-stock acquirers with low disclosure costs. Using a sample of stock-for-stock acquisitions in the United States during the period from 1988 to 2009, I find a positive association between acquirers' proprietary disclosure costs and pre-acquisition abnormal accruals. In addition, I find a negative association between pre-acquisition abnormal accruals and abnormal stock returns around the acquisition announcement for acquirers with high proprietary disclosure costs but not for acquirers with low proprietary disclosure costs. Assuming that the market is efficient with respect to publicly available information, this evidence is also consistent with acquirers with high proprietary disclosure costs using abnormal accruals to manage earnings. Finally, I do not find a statistically significant association between the extent of acquirers' earnings management and the acquisition premium received by target shareholders. This is consistent with acquirers' earnings management not serving to extract wealth from target shareholders. Overall, the evidence in this dissertation suggests that earnings management by stock-for-stock acquirers is a rational response to targets' expectations when high disclosure costs prevent the acquirers from credibly signaling the absence of earnings management.