Target Firm Earnings Management, Acquisition Premium, and Shareholder Gains

IF 2 Q2 BUSINESS, FINANCE

International Journal of Accounting Pub Date : 2020-06-01 DOI:10.1142/S1094406020500092

Javeria Farooqi, S. Jory, T. Ngo

引用次数: 2

Abstract

Using a sample of U.S. domestic deals from 1990 to 2016, we find that bidders adjust the amount of premium paid in mergers and acquisitions (M&As) based on the levels of earnings management at target firms. However, the way a firm manipulates earnings upward matters: earnings management via real activities manipulation is more detrimental than discretionary accruals. As a result, target firms that engage in real earnings management receive lower premiums in M&As, while accruals management has no effect on premiums. Correspondingly, we find that the targets’ M&A announcement-period cumulative abnormal returns are inversely related to their level of real earnings management, while the returns are not related to accruals management. Further analyses confirm that target shareholders’ wealth is not only driven by undervaluation, expected synergy, and managerial hubris, but also reflects bidders’ perception of the target firms’ earnings quality based on real earnings management.

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目标公司盈余管理、收购溢价和股东收益

使用1990年至2016年的美国国内交易样本，我们发现投标人根据目标公司的盈余管理水平调整并购中支付的溢价金额。然而，公司操纵盈利向上的方式很重要：通过实际活动操纵进行盈利管理比可自由支配的应计项目更有害。因此，从事实际盈余管理的目标公司在并购中获得的溢价较低，而应计项目管理对溢价没有影响。相应地，我们发现标的并购公告期累计异常收益与其实际盈余管理水平呈负相关，而收益与应计项目管理无关。进一步的分析证实，目标股东的财富不仅受到低估、预期协同效应和管理傲慢的驱动，还反映了投标人基于实际盈余管理对目标公司盈余质量的感知。

本文章由计算机程序翻译，如有差异，请以英文原文为准。

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来源期刊

International Journal of Accounting BUSINESS, FINANCE-

CiteScore

1.20

自引率

0.00%

发文量

期刊介绍： The aim of The International Journal of Accounting is to advance the academic and professional understanding of accounting theory, policies and practice from the international perspective and viewpoint. The Journal editorial recognizes that international accounting is influenced by a variety of forces, e.g., governmental, political and economic. Thus, the primary criterion for manuscript evaluation is the incremental contribution to international accounting literature and the forces that impact the field. The Journal aims at understanding the present and potential ability of accounting to aid in analyzing and interpreting international economic transactions and the economic consequences of such reporting. These transactions may be within a profit or non-profit environment. The Journal encourages a broad view of the origins and development of accounting with an emphasis on its functions in an increasingly interdependent global economy. The Journal also welcomes manuscripts that help explain current international accounting practices, with related theoretical justifications, and identify criticisms of current policies and practice. Other than occasional commissioned papers or special issues, all the manuscripts published in the Journal are selected by the editors after the normal double-blind refereeing process.