Using accounting information to identify corporate acquisition motives: Implications on post-acquisition performance

Abstract

This paper examines the post-acquisition long-term performance of corporate acquisitions using merger motives inferred from ex-ante publicly available accounting information. Using pre-acquisition accounting data, we build an acquisition score (A-Score) that proxies for the net effect of the acquisition motives. We predict and find that the A-Score constructed using pre-acquisition accounting data is positively associated with acquiring firm's post-acquisition performance. The A-Score enables the screening of current and potential corporate acquisitions by predicting the impact on post-acquisition performance. The findings demonstrate the importance of accounting information in inferring merger motives and improve our understanding of the effect of the acquisition motives on post-acquisition performance.