Record: oai:ARNO:641720

AuteurA. Durrani
TitelEarnings management around mergers and acquisition deals : study in UK, France, Germany and The Netherlands
BegeleiderV. O'Connell
FaculteitFaculteit Economie en Bedrijfskunde
OpleidingFEB MSc Accountancy and Control
SamenvattingThis study examines whether acquiring firms in the UK, France, Germany and The Netherlands use earnings management in order to increase their stock price prior to acquisition where stock is the primary payment method. Furthermore the long-term post-acquisition performance of those acquiring firms is analyzed. The accruals were calculated by using the modified Jones model. I find that firms’ managers engage in upward earnings management in stock financed deals in order to boost their stock prices. For the estimations of long-term post-acquisition performance I use the buy-and-hold return (BHAR) estimation method. The BHAR estimations show that the acquiring firms suffer a decrease in the long-term (3 years after the deal) post-performance when the deal is financed by stocks. Cash-financed deals perform better in the post-acquisition performance. These findings are in line with previous studies of Erikson & Wang (1991) and Botsari & Meeks (2008). I contribute to the literature by examining the existence of earnings management and the long-term post-deal performance of mergers and acquisitions.
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