How does a public announcement about a company exploring its potential sale or merger (“strategic alternatives”) affect the company and its shareholders? This study provides the first look at some of the positive and negative consequences to this unique disclosure of strategic alternatives....

This study develops and calibrates a revenue accruals model. Changes in accounts receivable and deferred revenues are modeled using the respective income statement and cash flow numbers (i.e., revenues and cash flows from sales) that relate directly to the accruals' origination and reversal....