International Journal of Advances in Management and Economics (IJAME)

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TitleEarnings Management through Accretive Share Buyback and Share Price Return, Malaysian Perspectives
AuthorSitra Selvi Chandren
AbstractThis study examines the relationship between earnings management through accretive share buyback and share price return for a sample of 220 Malaysian listed firms from year 2001 to 2008. The objective of this study is to determine the market behavior on those earnings management firms that made good news announcement which justifies the worthiness of the high-priced earnings management activity, the share buyback (real activity manipulation) known as the accretive share buyback. The 5 day Cumulative Abnormal Return (CAR) result shows that these firms earned positive stock return immediately after the earnings announcement date. Further, the regression results report on the existence of positive effect of accretive share buyback on share price return. Basically, firms which announced good or positive earnings news through accretive share buyback earned positive abnormal returns. Thus, investors reward firms that made positive earnings surprises. This is the reason why firms that missed earnings forecast (EPS forecast) initially involve in earnings management to meet or beat EPS forecast to deliver good news to market in return to receive compliments from investors through share prices. The good news is a challenge to firms in capital market for a positive financial health and future prospect. Earnings management through accretive share buyback played the pivotal role to achieve the good news. This paper contributes on the market behavior or investors reaction on firms that deliver good news through earnings management through accretive share buyback.

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