Acquisition profitability and timely loss recognition

Francis, JR; Martin, X

Acquisition profitability and timely loss recognition

Francis, JR Martin, X

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Publication Type:: Journal Article
Citation:: Journal of Accounting and Economics, 2010, 49 (1-2), pp. 161 - 178
Issue Date:: 2010-02-01

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Field	Value	Language
dc.contributor.author	Francis, JR	en_US
dc.contributor.author	Martin, X	en_US
dc.date.issued	2010-02-01	en_US
dc.identifier.citation	Journal of Accounting and Economics, 2010, 49 (1-2), pp. 161 - 178	en_US
dc.identifier.issn	0165-4101	en_US
dc.identifier.uri	http://hdl.handle.net/10453/29808
dc.description.abstract	We investigate if timely loss recognition is associated with acquisition-investment decisions. Using a Basu (1997) piece-wise linear regression model, we find that firms with more timely incorporation of economic losses into earnings make more profitable acquisitions, measured by the bidder's announcement returns and by changes in post-acquisition operating performance. These firms are also less likely to make post-acquisition divestitures (consistent with better ex ante investment decisions), but act more quickly to divest. We also find that the positive association between timely loss recognition and acquisition profitability is more pronounced for firms with higher ex ante agency costs. © 2009 Elsevier B.V. All rights reserved.	en_US
dc.relation.ispartof	Journal of Accounting and Economics	en_US
dc.relation.isbasedon	10.1016/j.jacceco.2009.09.003	en_US
dc.subject.classification	Accounting	en_US
dc.title	Acquisition profitability and timely loss recognition	en_US
dc.type	Journal Article
utslib.citation.volume	1-2	en_US
utslib.citation.volume	49	en_US
utslib.for	1501 Accounting, Auditing and Accountability	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	closed_access
pubs.issue	1-2	en_US
pubs.publication-status	Published	en_US
pubs.volume	49	en_US

Abstract:

We investigate if timely loss recognition is associated with acquisition-investment decisions. Using a Basu (1997) piece-wise linear regression model, we find that firms with more timely incorporation of economic losses into earnings make more profitable acquisitions, measured by the bidder's announcement returns and by changes in post-acquisition operating performance. These firms are also less likely to make post-acquisition divestitures (consistent with better ex ante investment decisions), but act more quickly to divest. We also find that the positive association between timely loss recognition and acquisition profitability is more pronounced for firms with higher ex ante agency costs. © 2009 Elsevier B.V. All rights reserved.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/29808