Earnings management of target firms and deal premiums: The role of industry relatedness

This paper contributes to the merger and acquisitions (M&A) literature by providing evidence for role of industry relatedness in association between target firms' earnings management (EM) before deal premium offered acquirer. We argue that familiarity with industry's policies practices is a crucial factor helps acquirers see through targets' EM. Our supports this prediction relation accounting manipulation as we observe income increasing accrual results significantly higher premiums interindustry deals, which not case when targets belong same industry.