Equity Valuation and Corporate Control.

“If accruals are independent, and identically distributed with constant mean and variance, differencing will induce a negative serial correlation (of−0.5); see Dechow (1994) and Choi, Gramlich, and Thomas (1993).”

“DeAngelo 1990 describes the information and methods used by investment bankers to estimate values in corporate control transactions.”

“Although discounted cash flow valuation may be useful in assessing equity values to a given issuer, DeAngelo (1990) argues that it is not a very credible means of convincing outside CAR Vol. 24 No. 4 (Winter 2007) stockholders because of the sensitivity of the value estimate to the assumptions made…”

“Other papers (e.g., DeAngelo, 1990, for management buyouts) investigate the ‘real world’ use of valuation models in different settings but do not discuss valuation accuracy.”

“In fact, evidence suggests that valuation multiples such as the price-to-earnings and price-to-book ratios dominate when practitioners carry out company valuation (DeAngelo, 1990; Kaplan & Ruback, 1995; Kim & Ritter, 1999; Demirakos, Strong & Walker, 2004).”

“…see Section III for a more detailed discussion on various M&A filings required by the Security and Exchange Commission (SEC). financial advisors (DeAngelo, 1990; Holthausen and Zmijewski, 2012).6 Under this approach, the bank identifies companies that are closely comparable to the target firm…”

“For example, DeAngelo (1990) and Perry and Williams (1994) show evidence on earning management by discretionary accrual means in a year prior to the buyout announcement and found that discretionary accruals are negative before the management buyout.”

“Kubick et al. (2016) examine the effect of receiving a tax-related SEC comment on tax avoidance behavior. on the actions taken by firms to reduce information asymmetry (e.g., DeAngelo 1990; Eckbo et al. 1990; Hansen 1987).”

“examined this type of valuation, focusing only on p ublic firms (DeAngelo, 1990; Elnathan et al., 2009).”

“1 DeAngelo (1990) decribes the use of different valuation approaches by a limited number of investment bankers to evaluate the fairness of management buyouts in 1988, but does not investigate the accuracy of these valuations.”

“Bebchuk and Kahan (1989), DeAngelo (1990), Carney (1992), Elson (1992), and Davidoff (2006) highlight the flaws inherent in fairness opinions, arguing that they accompany most deals and could act as a rubber stamp to insulate directors or to justify managers’ offers to outsiders rather than to…”

“DeAngelo (1990) points out that it is not very convincing to external shareholders due to the sensitivity of value estimates set by underwriters, investors are more likely to go for those IPOs in which window of opportunity prevails.”

“Valuation multiples are also used in the valuation of initial public offerings, investment bankers’ fairness opinions, leveraged buyout transactions, seasoned equity offerings and other merger and acquisition activities, M&A (DeAngelo, 1990; Kaplan & Ruback, 1995; Kim & Ritter, 1999).”

“We employ two valuation metrics used by investment bankers to value firms (DeAngelo, 1990): 1) the price-to-sales ratio (P/Sales) is our relative equity valuation metric and 2) Tobin’s Q is used to proxy for firm valuation.”

“This effect is magnified by strategic managerial disclosures that promote the transaction (DeAngelo, 1990; Eckbo et al., 1990; Hansen, 1987).”

“The calculation of the net present value needs to discount the revenue and the costs in every period during the investment project [15].”

“DeAngelo (1990) argued that using “multiples,” based on accounting numbers, to compensate for these shortcomings can be more convincing to consumers.”

“This approach is appealing because firm values are estimated quickly and without needing to project various parameters such as cash flows (DeAngelo 1990; Liu, Nissim, and Thomas 2002; Soffer and Soffer 2003).”

“These studies' mixed results are consistent with researchers who argue that legal safeguards can be inherently weak (see Bebchuk & Kahan, 1989; Carney, 1992; Davidoff, 2006; DeAngelo, 1990; Elson, 1992).”

“DeAngelo (1990) finds that managers have incentives during merger activities to manage earnings upward so as to convey to current stockholders that the potential merger will not adversely affect their investment.”

“In de praktijk worden dan ook naast de contante waarde methode maatstaven gebruikt gebaseerd op boekhoudkundige informatie om tot de waardering van een onderneming te komen (DeAngelo, 1990; Holterman, 1994).”

“A growing literature investigates the informativeness of investment banks ’ valuations (e.g., DeAngelo (1990), Kisgen , Qian, and Song (2009), Cain and Denis (2013), Shaffer (2024), and Eaton et al. (2022)).”

“DeAngelo (1990) provides a theoretical basis for the use of accounting information in mergers and acquisitions.”

“3 Rangan (1998); Teoh, Welch, and Wong (1998a,b); Shivakumar (2000); DuCharme et al. (2004); and Ball and Shivakumar (2008) study earnings management when firms conduct initial public offerings (IPO) or seasoned equity offerings (SEO).”