Copyright (c) 2011 All rights reserved. http://works.bepress.com/marcus_braga_alves Recent documents in Marcus V. Braga-Alves en-us Sat, 29 Jan 2011 13:50:05 PST 3600 http://works.bepress.com/marcus_braga_alves/3 http://works.bepress.com/marcus_braga_alves/3 Wed, 04 Nov 2009 11:04:36 PST In this paper, we test the hypothesis that managers use discretionary accruals to manipulate reported earnings when they face takeover threats. Our sample period includes three years that followed the enactment of the Sarbanes-Oxley Act of 2002, which improved the quality and transparency of financial reports after a series of accounting scandals. Using the modified version of Jones (1991) model before and after adjusting for performance, we provide evidence that managers make income-increasing accounting choices when they face a higher probability of being the target of a takeover. We find that the relation between earnings management and this probability is less economically and statistically significant after the enactment of the Sarbanes-Oxley Act and for larger firms, which are more scrutinized by market participants and specialized press. We also present evidence that the takeover probability decreases when managers make income-increasing accounting choices in the previous year. Our results are consistent with the hypothesis that earnings management is used to influence shareholder perception regarding a firm’s profitability and, consequently, to decrease the probability of a successful takeover. Marcus V. Braga-Alves Working Papers http://works.bepress.com/marcus_braga_alves/2 http://works.bepress.com/marcus_braga_alves/2 Wed, 04 Nov 2009 10:57:58 PST On July 15, 2008, the US Securities and Exchange Commission announced temporary restrictions on naked short sales of the stocks of 19 financial firms. The restrictions offer a unique empirical setting to test Miller’s (1977) conjecture that short-sale constraints result in overpriced securities and low subsequent returns. Consistent with Miller’s overpricing hypothesis, we find evidence of a positive (negative) market reaction to the announcement (expiration) of the short-sale restrictions. Announcement returns are higher for firms that appear to be subject to more naked short selling in the days immediately preceding the announcement of the restrictions. The restrictions are successful in eliminating naked short sales for the restricted stocks, but naked short sales increase dramatically for a closely matched sample of financial firms during the restricted period. We also find that the restrictions negatively impact various measures of liquidity, including bid-ask spreads and trading volume. From a public policy perspective, our findings suggest that, at a minimum, policymakers should pause when considering further short sale restrictions. Thomas J. Boulton Publications http://works.bepress.com/marcus_braga_alves/1 http://works.bepress.com/marcus_braga_alves/1 Wed, 04 Nov 2009 10:55:17 PST In December 2000, the S˜ao Paulo Stock Exchange launched a new premium market segment for companies that voluntarily commit to “good practices of corporate governance.” We construct a composite index (NM6) that combines six proxies for the main governance practices targeted by Bovespa’s reform. We find that higher scores for our index are related to greater market value, but not to better operating performance. An investment strategy that purchased stocks of firms with high NM6 and sold stocks of firms with low NM6 would have earned abnormal returns of 10.68% per year from 2001 to 2005. Marcus V. Braga-Alves Publications