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Takeover Vulnerability and Pre-Emptive Earnings Management

Tunyi, Abongeh; Agyei-Boapeah, Henry; Yang, Junhong; Machokoto, Michael

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Abongeh Tunyi

Henry Agyei-Boapeah

Junhong Yang

Michael Machokoto


We explore whether firms that are vulnerable to takeovers pre-emptively manage earnings in anticipation of such events. We find a positive relationship between firms' vulnerability to takeovers and their propensity to manage earnings, mainly through the manipulation of real activities. We consider two motivations for firms' pre-emptive earnings management behavior; (1) to deter future takeovers and (2) to optimize M&A outcomes. Concerning the former, we document evidence consistent with entrenched managers using real earnings management to deter or delay future takeovers. Concerning the latter, we find evidence suggesting that, contingent on receiving takeover bids, vulnerable firms that pre-emptively manipulate real activities extract comparatively higher merger premiums. Overall, our findings suggest that managers of vulnerable firms pre-emptively manage earnings to purposefully delay the timing and optimize the outcomes of prospective takeovers.


Tunyi, A., Agyei-Boapeah, H., Yang, J., & Machokoto, M. (2024). Takeover Vulnerability and Pre-Emptive Earnings Management. European Accounting Review, 33(2), 677-711.

Journal Article Type Article
Acceptance Date Aug 7, 2022
Online Publication Date Sep 5, 2022
Publication Date 2024
Deposit Date Aug 10, 2022
Publicly Available Date Mar 6, 2024
Journal European Accounting Review
Print ISSN 0963-8180
Electronic ISSN 1468-4497
Publisher Routledge
Peer Reviewed Peer Reviewed
Volume 33
Issue 2
Pages 677-711
Keywords Business, Management and Accounting (miscellaneous); Accounting; Business and International Management; Economics, Econometrics and Finance (miscellaneous); Economics and Econometrics; Finance
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