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Value creation and earnings management in acquisitions: Evidence from Scandinavian Biopharmaceutical industry

Bui, Dieu Huong and Fredriksson, Kim (2010)
Department of Business Administration
Abstract
This paper aims to examine the value creation and earnings management from acquisitions in Scandinavian biopharmaceutical industry from 1999 to 2008. In our study we do not find any evidence that acquirers in general make any abnormal return in the 3 and 11 days around the announcement date. However, when splitting the result according to their size we do find statistical proof that large firms within the 3 days do create an abnormal return. Meanwhile the small companies show negative performance within 11 days around the announcement date. When measuring the long-term performance, through an equally weighted portfolio, our results indicate a slight better performance from our acquirers in all sizes compared with their equivalents. The... (More)
This paper aims to examine the value creation and earnings management from acquisitions in Scandinavian biopharmaceutical industry from 1999 to 2008. In our study we do not find any evidence that acquirers in general make any abnormal return in the 3 and 11 days around the announcement date. However, when splitting the result according to their size we do find statistical proof that large firms within the 3 days do create an abnormal return. Meanwhile the small companies show negative performance within 11 days around the announcement date. When measuring the long-term performance, through an equally weighted portfolio, our results indicate a slight better performance from our acquirers in all sizes compared with their equivalents. The size of the transaction value show that the higher cost paid the higher the abnormal return the large acquirer will receive, while the small companies’ returns are affected negatively to the higher price paid. Concerning the earnings management it is mainly made by the large companies which have greater possibility to manipulate their earnings. (Less)
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author
Bui, Dieu Huong and Fredriksson, Kim
supervisor
organization
year
type
H2 - Master's Degree (Two Years)
subject
keywords
biopharmaceutical., scandinavian, earnings management, short and long term performance, Acquisitions, Event study, Management of enterprises, Företagsledning, management
language
Swedish
id
2169632
date added to LUP
2010-06-04 00:00:00
date last changed
2012-11-12 11:56:00
@misc{2169632,
  abstract     = {This paper aims to examine the value creation and earnings management from acquisitions in Scandinavian biopharmaceutical industry from 1999 to 2008. In our study we do not find any evidence that acquirers in general make any abnormal return in the 3 and 11 days around the announcement date. However, when splitting the result according to their size we do find statistical proof that large firms within the 3 days do create an abnormal return. Meanwhile the small companies show negative performance within 11 days around the announcement date. When measuring the long-term performance, through an equally weighted portfolio, our results indicate a slight better performance from our acquirers in all sizes compared with their equivalents. The size of the transaction value show that the higher cost paid the higher the abnormal return the large acquirer will receive, while the small companies’ returns are affected negatively to the higher price paid. Concerning the earnings management it is mainly made by the large companies which have greater possibility to manipulate their earnings.},
  author       = {Bui, Dieu Huong and Fredriksson, Kim},
  keyword      = {biopharmaceutical.,scandinavian,earnings management,short and long term performance,Acquisitions,Event study,Management of enterprises,Företagsledning,management},
  language     = {swe},
  note         = {Student Paper},
  title        = {Value creation and earnings management in acquisitions: Evidence from Scandinavian Biopharmaceutical industry},
  year         = {2010},
}