We analyze the effect of external financing concerns on managers' financial reporting behavior prior to management buyouts (MBOs). Prior studies hypothesize that managers intending to undertake an MBO have an incentive to manage earnings downward to reduce the purchase price. We hypothesize that...

Prior studies suggest that investors have limited attention. Tests of the inattention hypothesis have been performed in the context of relatively small corporate events, particularly earnings announcements. Presumably, large corporate events would always attract sufficient investor attention....