Earnings management by acquiring firms in stock for stock mergers

Earnings management by acquiring firms in stock for stock mergers We investigate whether acquiring firms attempt to increase their stock price prior to a stock for stock merger in order to reduce the cost of buying the target. In a sample of stock for stock mergers completed between 1985 and 1990, we find that acquiring firms manage earnings upward in the periods prior to the merger agreement. Our results also indicate that the degree of income increasing earnings management is positively related to the relative size of the merger. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Accounting and Economics Elsevier

Earnings management by acquiring firms in stock for stock mergers

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Publisher
Elsevier
Copyright
Copyright © 1999 Elsevier Science B.V.
ISSN
0165-4101
D.O.I.
10.1016/S0165-4101(99)00008-7
Publisher site
See Article on Publisher Site

Abstract

We investigate whether acquiring firms attempt to increase their stock price prior to a stock for stock merger in order to reduce the cost of buying the target. In a sample of stock for stock mergers completed between 1985 and 1990, we find that acquiring firms manage earnings upward in the periods prior to the merger agreement. Our results also indicate that the degree of income increasing earnings management is positively related to the relative size of the merger.

Journal

Journal of Accounting and EconomicsElsevier

Published: Apr 1, 1999

References

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