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- Title
THE FINANCIAL EFFECTS OF TAKEOVER: ACCOUNTING RATES OF RETURN AND ACCOUNTING REGULATION.
- Authors
Chatterjee, R.; Meeks, G.
- Abstract
The empirical literature on the financial effects of takeover has drawn on two principal sources of statistical evidence: stock market returns and accounting rates of return derived from companies' annual reports. This is a very uncomfortable state of affairs--whether one is trying to evaluate takeover, or to use the best established data sources on company performance to evaluate other forms of ownership change or indeed the impact on companies of any economic event. The conflicting results suggest that either cumulative abnormal returns to shareholders preceding takeover or accounting rates of return after takeover systematically misrepresent the underlying cash flows of the enterprise. Instead the takeover process could be selecting targets which are undervalued and/or acquirers which are overvalued. These studies were directed at the comparison of profitability levels of very different firms or industries rather than at the more modest enterprise being considered here--of comparing the profitability of the same firms in adjacent periods.
- Publication
Journal of Business Finance & Accounting, 1996, Vol 23, Issue 5/6, p851
- ISSN
0306-686X
- Publication type
Academic Journal
- DOI
10.1111/j.1468-5957.1996.tb01155.x