In share for share corporate mergers, the consideration received by target shareholders is the acquiring firm’s stock. The total number of shares issued by the acquiring firm to gain control is determined by a negotiated exchange ratio (the number of shares of acquiring firm’s stock to be issued for a share of target’s stock) agreed on by the acquirer and the target. The number of shares of the acquiring firm’s stock exchanged for each of the target’s shares is computed based on the acquiring firm’s stock price on or near the merger agreement date. Because the exchange ratio is inversely related to the acquiring firm’s stock price, the acquiring firm may have an incentive to increase accounting earnings prior to the merger in the hope of raising the market price of its stock, and therefore reducing the cost of buying the target.
Whether earnings management succeeds in raising the market price of a bidder’s stock will depend on the level of information efficiency in the market, and whether an analyst can “see through” and “reverse out” the earnings management device employed by the bidder’s directors. But if they cannot – for example, the market is semi-strong efficient in Fama’s (1970) terms whilst the earnings management is opaque to the analyst - and the bidder’s price is affected, then earnings management in such takeovers may have much more powerful economic consequences than in routine financial reporting. This is because, in such routine reporting, earnings management may only have a short-term impact on reported earnings, and one which is subsequently reversed: earnings are “borrowed” from future accounting periods, or expenses are delayed; but for given cash flows, the truth will come out in the end. However, in a share for share merger, earnings management can affect the terms of the deal and whether the bid succeeds. In this context, therefore, it could have irreversible consequences for the wealth of different shareholder groups (bidder and target), for industrial structure, and for which management team emerges from the market for corporate control in command of the target’s assets. Moreover, in the case of a large bid, the impact of the deal on the acquirer’s post-merger accounts is often so pervasive that the reversals of past earnings management may be swamped.
Our daily lives are shaped by a series of decision processes, ranging from very unimportant choices to life-changing judgments. The complexity of the decision processes increases tremendously when the decision-making takes place in a social context, i.e., when other human beings are directly involved in the decision. In such conditions the decision-maker not only tries to maximize his own utility, but also needs to take into account the interdependent nature of the situation. Information about others’ preferences, characteristics, and actions play an important role, and need to be thoroughly evaluated and predicted before making a decision. In this thesis we explore the neural correlates of two different types of social decision-making.
As in many other developed economies, the farm sector in Israel has experienced considerable structural changes over the last few decades. These included a massive exit of self-employed farm operators, an increase in the size of remaining farms, and an increase in off-farm labor participation among the farm population.
The process of structural change has been accelerated by two major events: the debt crisis of 1985 and the opening of the country to foreign labor in the early 1990s. The effect of foreign workers on farm structure in Israel has been examined by Kislev (2003). In this paper I focus on the effects of the debt crisis and the subsequent legislation and implementation of a debt restructuring policy.
