Electronic Theses and Dissertations

Identifier

4944

Date

2017

Date of Award

4-19-2017

Document Type

Dissertation

Degree Name

Doctor of Philosophy

Major

Business Administration

Concentration

Finance

Committee Chair

Thomas Mcinish

Committee Member

Daniel sherrell

Abstract

This dissertation research comprises three essays in finance. The first and second essays study the effect of religion on corporate decision making and financial reporting. The first essay shows that contingent payment in mergers and acquisitions not only violates Islamic law but also results in several agency issues by creating an incentive for managers to participate in long-term value-destroying behavior during earnout periods. Our empirical results, using regression as well as difference-in-difference estimation, show that target managers significantly manage earnings upward by cutting discretionary expenses during earnout periods. As compared to a sample of matched non-earnout M&A, acquisitions with earnout clauses are followed by significantly lower long-term abnormal returns. Our arguments and results have significant economic and legal consequences on cross-border M&A and could be used to facilitate worldwide economic integration. The second essay argues that financial statement analytical tools could violate several commands of the Islamic law. Specifically, traditional liquidity ratios imply undervaluation, uncertainty, and interest bearing aspects that are strictly prohibited in the Islamic law. We propose an Islamic-compliant measure of corporate liquidity. In order to validate our proposed ratio as a measure of corporate liquidity, we incorporate it in the traditional corporate bankruptcy prediction models. Our measure significantly improves the accuracy of the corporate bankruptcy prediction models of Altman (1968) Z-score and Ohlson (1980). The third essay conjectures that strong brands reduce the propensity of firms to engage in activities that lead to earnings restatements and accounting fraud. Our empirical results show that firms with valuable brands are less likely to announce (1) accounting restatements, (2) income-decreasing restatements, and (3) restatements that involve an SEC investigation. Our findings establish another channel through which valuable brands enhance firm value.

Comments

Data is provided by the student.

Library Comment

dissertation or thesis originally submitted to the local University of Memphis Electronic Theses & dissertation (ETD) Repository.

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