Does Stock for Stock M&A Exhibit Real Earnings Management?

Ziqiao Zhang () and Qiusheng Zhang ()
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Ziqiao Zhang: Beijing Jiaotong University
Qiusheng Zhang: Beijing Jiaotong University

A chapter in LISS 2014, 2015, pp 1077-1083 from Springer

Abstract: Abstract We investigate whether acquiring firms attempt to adopt real earnings management strategy to upward reported earnings in the period of M&A announcement and the effect on performance of post-M&A, based on the related data of share payment M&A affairs occurring in China’s capital market from 2008–2010. Our results demonstrate that acquiring firms overstate earnings in the period of M&A in order to improve market confidence. Meanwhile, we also find that real earnings management is one of the main reasons to explain under-performance of post M&A. It is necessary for stakeholders to realize real earnings management opportunistic behavior underlying financial statements when they evaluate acquiring firm’s value.

Keywords: Share payment; Real earnings management; Performance of M&A (search for similar items in EconPapers)
Date: 2015
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-662-43871-8_155

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DOI: 10.1007/978-3-662-43871-8_155

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