The Role of Accruals Quality in the M&A Market
نویسندگان
چکیده
We examine the role of target firms’ accruals quality (AQ) on the course of the acquisition process. We predict and find that target AQ is significantly associated with the choice of sales method (auction vs. negotiation), acquirer and target returns, the likelihood of deal completion, and the speed of the process overall. We further find that AQ has a more pronounced effect on M&A transactions when the target firm is sold via auction versus negotiation and that the relative importance of AQ driven by discretionary reporting choices increases as the transaction moves forward in time. Our results provide new evidence on the role of financial accounting quality in the efficient allocation of capital resources.
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