Real activities manipulation in stock-for-stock mergers

Olukemi Fasipe and Huey-Lian Sun ()
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Olukemi Fasipe: Northern Alberta Institute of Technology
Huey-Lian Sun: Morgan State University

Journal of Economics and Finance, 2020, vol. 44, issue 3, No 8, 570-586

Abstract: Abstract This study examines whether firms that primarily use stock of their companies to pay for acquisitions manipulate real activities in the year preceding the merger announcement to inflate earnings. Using post-SOX data of mergers and acquisitions completed between 2003 and 2013, the findings of this study show that acquiring firms in stock-for-stock mergers inflate earnings by cutting discretionary expenses, manipulating sales to increase revenue, and overproducing goods to reduce the cost of goods sold.

Keywords: Stock-for-stock mergers; Earnings management; Real activities manipulation (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s12197-019-09500-9

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