<![CDATA[The main accounting issue in this research which can trigger wealthtransfer from acquiring company’s shareholders to target company’sshareholders is earning management that was done during the lastpublication before the acquisition. Therefore, the purposes of this researchare: (1) to test whether the target company’s management performedearnings management by increasing the amount of earnings which wasreported in the last publication before the acquisition announcement, (2) totest whether the earnings management which was done by the targetcompany benefit their shareholders, and (3) to test whether managerialownership affects earnings management and the wealth of the targetcompany’s shareholders.Hypotheses in this research were developed using agency theory asthe main theory, which was supported by earnings management theorywith the same motivations as this research such as bonus plan motivation,chief executive officer (CEO) change motivation, and Initial Public Offering(IPO) motivation, and Efficient Market Hypothesis.The sample for this research are target companies undergonesuccessful acquisition in Jakarta Stock Exchange from 1990 to 2005. Thesample consists of 54 target companies. The dependent variable of targetcompanies shareholders’ wealth, is represented by cumulative abnormalreturn (CAR) as the proxy, calculated by using the Market Model. Theindependent variable of earnings management is calculated by ModifiedJones Model, and the ownership managerial variable is calculated bymanagement ownership percentage on target company’ shares. Theresearch hypothesis is tested by t-test and ordinary least squareregression test.The result of this research is: (1) the target company is doingearnings management by increasing discretionary accrual for the lastpublication just before the acquisition, (2) the positive effect of earningsmanagement on target company shareholders wealth at the lastpublication just before the acquisition is bigger and more significantstatistically compared with the previous period, and (3) managerialownership has positive effect and statistically significant on targetcompany shareholders’ wealth during the last publication just before theacquisition.]]>
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