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Published in:
2015 | OriginalPaper | Chapter
Does Stock for Stock M&A Exhibit Real Earnings Management?
Authors : Ziqiao Zhang, Qiusheng Zhang
Published in: LISS 2014
Publisher: Springer Berlin Heidelberg
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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.