Business, Management and Accounting
8 years ago

M&A firms still manipulate earnings post-SOX, impacting financial transparency.

Pre-merger earnings management : Sarbanes Oxley, leverage and non-cash acquisition premia
Malek Alsharairi

Paper Summary

The article investigates how companies manipulate their earnings before mergers and acquisitions in the US. The researchers looked at whether companies near mergers adjust their earnings, if debt affects earnings manipulation, and if acquirers can hide their manipulation from targets. They found that acquirers tend to boost their earnings before non-cash deals, while targets show less evidence of manipulation. Despite laws like Sarbanes-Oxley, earnings manipulation didn't change much over time. Companies with higher debt levels tend to manipulate earnings more. This shows that companies may adjust their accounting practices based on their financial situation and industry norms.

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