Earnings management, lawsuits, and stock-for-stock acquirers' market performance

Guojin Gong, Henock Louis, Amy X. Sun

Research output: Contribution to journalArticlepeer-review

66 Scopus citations

Abstract

There is a positive association between stock-for-stock acquirers' pre-merger abnormal accruals and post-merger announcement lawsuits. The market only partially anticipates the effects of post-merger announcement lawsuits at the merger announcement and the post-merger announcement long-term market underperformance is largely limited to litigated acquisitions. Overall, the evidence suggests that it is important that investors not only undo the direct stock price effects of earnings management but also factor the contingent legal costs associated with earnings management.

Original languageEnglish (US)
Pages (from-to)62-77
Number of pages16
JournalJournal of Accounting and Economics
Volume46
Issue number1
DOIs
StatePublished - Sep 2008

All Science Journal Classification (ASJC) codes

  • Accounting
  • Finance
  • Economics and Econometrics

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