How do stock-for-stock acquirers manage earnings? The accruals feature of real earnings management

Che-Chia Chang and Hunghua Pan

Journal of Contemporary Accounting and Economics, 2020, vol. 16, issue 2

Abstract: This paper investigates whether stock-for-stock acquirers undertake real activities to manage earnings before merger announcements. Our results show that stock-for-stock acquirers present unusually high levels of credit sales and overproduction in the quarter immediately before the merger announcement. We also find that the accruals feature of real earnings management can explain the stock-for-stock acquirers’ high discretionary current accruals. In addition, stock-for-stock acquirer firms that accelerate their credit sales experience subsequent market underperformance. Overall, we provide a novel insight into the accruals feature of real earnings management.

Keywords: Corporate mergers; Discretionary current accruals; Real earnings management (search for similar items in EconPapers)
JEL-codes: G34 M41 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:16:y:2020:i:2:s1815566920300199

DOI: 10.1016/j.jcae.2020.100202

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