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11 - Opportunistic accounting practices around stockfinanced mergers in Spain

International Mergers and Acquisitions Activity Since 1990, 2007, p.261-277

2007 Elsevier Inc. ;ISBN: 0750682892 ;ISBN: 9780750682893 ;DOI: 10.1016/B978-075068289-3.50013-7

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  • Title:
    11 - Opportunistic accounting practices around stockfinanced mergers in Spain
  • Author: Pastor-Llorca, María J. ; Poveda-Fuente, Francisco
  • Is Part Of: International Mergers and Acquisitions Activity Since 1990, 2007, p.261-277
  • Description: This chapter examines if the acquiring firms in Spain manipulate accounting earnings upward to reduce the cost of buying the target. The empirical literature on earnings management is extended by testing these accounting practices in a market whose intrinsic characteristics and accounting rules are different from those of the United States. The chapter focuses on market efficiency in interpreting accounting accruals by examining if the post-merger performance of acquiring firms is partially attributable to the reversals of the effect of earnings-management practices. First of all, the stock price performance following stock-by-stock mergers is analyzed by incorporating the methodological procedures that minimize the biases observed in the long-term event studies in order to avoid detecting abnormal returns where there are none. Then, the possible relationship between opportunistic earnings management practices and post-merger abnormal returns are examined. Considerable debate remains regarding long-run abnormal returns and the possibility that they originate exclusively from methodological biases. The abnormal pattern present in the Spanish market can be affected by earnings-management practices. The evidence for the Spanish market is similar to that of directors of acquiring firms who make use of the accounting discretion to report high earnings at the time of the merger decision, verifying that stock-financed mergers produce similar accruals patterns in very different markets.
  • Publisher: Elsevier Inc
  • Language: English
  • Identifier: ISBN: 0750682892
    ISBN: 9780750682893
    DOI: 10.1016/B978-075068289-3.50013-7
  • Source: Ebook Central Academic Complete
    ScholarVox International
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