Acquisition Accounting Method and Bid Premia for Target Firms.

John R. C. Robinson

55 citations0/0 files storedThe Accounting Review

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Corporate Finance and Governance Auditing, Earnings Management, Governance Financial Reporting and Valuation Research

Abstract

Abstract Previous research suggests that certain benefits may derive from the method used to account for business combinations and may affect how bidding firms structure and classify corporate acquisitions. This paper investigates whether benefits derived from accounting method are reflected in bid premia for target firms. Three estimates of bid premia are examined in 95 stock-for-stock acquisitions, 59 accounted for as poolings, and 36 accounted for as purchases. Sampling restrictions, covariance analysis, and a nonparametric matched pair comparison control for potentially confounding variables identified from prior research on bid premia determinants. The results show an association between acquisition accounting method and bid premia for target firms.

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References

1986Agency Costs of Free Cash Flow, Corporate Finance, and Takeovers 1986Large Shareholders and Corporate Control 1983The market for corporate control 1988Synergistic gains from corporate acquisitions and their division between the stockholders of target and acquiring firms 1980Financial Theory and Corporate Policy.1988Takeovers: Their Causes and Consequences 1986Investment banking and the capital acquisition process 1989Preemptive Bidding and the Role of the Medium of Exchange in Acquisitions

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