| This thesis examines earnings management and its capital market consequences in two previously unexamined settings, open market share repurchases and extreme transitory changes in performance. The first essay investigates whether managers engaging in an open market share repurchase program manage earnings downward. The essay also examines the short-term and long-term effects of the managers' disclosure policies on stock returns. Using 2,939 repurchase announcements during 1980--1998, we find that the discretionary accruals of repurchasing firms are significantly negative. Furthermore, there is a significant and negative relation between long-term returns and discretionary accruals. The second essay tests whether transitory shocks to cash flows and discretionary accruals are related, and examines the return profile of extreme performers. We document that firms with large cash flow shocks exhibit significant and negative discretionary accruals. Moreover, extreme performers exhibit significant abnormal returns one year after the shock. |
