Journal article
Earnings myopia and private equity takeovers
Review of accounting studies, Vol.30(1), pp.994-1035
03/2025
DOI: 10.1007/s11142-024-09844-6
Abstract
Abstract We examine the role of private equity in alleviating earnings myopia induced by public markets. We first construct a measure of earnings myopia and show that this measure varies as predicted with determinants and effects of myopia. Then we show that public firms exhibiting earnings myopia realize an increased likelihood of takeover by private equity buyers. Cross-sectional analyses indicate that this relation is strongest when costs of earnings myopia are likely higher. Following private equity takeovers, firms exhibiting greater measures of earnings myopia realize improvements to R&D investment and productivity. The results add to the understanding of the role of private equity in identifying and alleviating earnings myopia within U.S. capital markets. This is important given the increasing size of private equity assets under management. Takeover premiums paid for myopic firms suggest a cost of earnings myopia at approximately 6.9% of firm value.
Details
- Title: Subtitle
- Earnings myopia and private equity takeovers
- Creators
- Paul HribarTodd KravetTrent Krupa
- Resource Type
- Journal article
- Publication Details
- Review of accounting studies, Vol.30(1), pp.994-1035
- DOI
- 10.1007/s11142-024-09844-6
- ISSN
- 1380-6653
- eISSN
- 1573-7136
- Language
- English
- Electronic publication date
- 06/28/2024
- Date published
- 03/2025
- Academic Unit
- Accounting
- Record Identifier
- 9984654643202771
Metrics
3 Record Views