Panned M&A deals causing restatements, study finds

Panned M&A deals causing restatements, study finds

About 18% of companies whose M&A deals were poorly received by investors later had to restate results

BOTCHED ACQUISITIONS could lead to companies misreporting results and restating accounts, a study has found.

The American Accounting Association study, cited by Reuters, found that about 18% of companies whose M&A deals were poorly received by investors later had to restate results.

“When a negative market reaction suggests that a firm’s management made a poor M&A decision, there will be greater pressure on management to produce positive operating performance,” said the study.

The study suggested that this could put pressure on managers to change financial reports.

“When you see that there’s a possibility of heightened pressure on a manager, you would want to evaluate their earnings quality more carefully,” Daniel Bens, a University of Arizona accounting professor and study co-author, said in an interview with Reuters. “They are under a lot of pressure to keep their jobs.”

The study was made up of about 2,300 US public companies that made acquisitions from 1996 to 2007.

Share

Subscribe to get your daily business insights

Resources & Whitepapers

Why Professional Services Firms Should Ditch Folders and Embrace Metadata
Professional Services

Why Professional Services Firms Should Ditch Folders and Embrace Metadata

3y

Why Professional Services Firms Should Ditch Folde...

In the past decade, the professional services industry has transformed significantly. Digital disruptions, increased competition, and changing market ...

View resource
2 Vital keys to Remaining Competitive for Professional Services Firms

2 Vital keys to Remaining Competitive for Professional Services Firms

3y

2 Vital keys to Remaining Competitive for Professi...

In recent months, professional services firms are facing more pressure than ever to deliver value to clients. Often, clients look at the firms own inf...

View resource
Turn Accounts Payable into a value-engine
Accounting Firms

Turn Accounts Payable into a value-engine

3y

Turn Accounts Payable into a value-engine

In a world of instant results and automated workloads, the potential for AP to drive insights and transform results is enormous. But, if you’re still ...

View resource
Digital Links: A guide to MTD in 2021
Making Tax Digital

Digital Links: A guide to MTD in 2021

3y

Digital Links: A guide to MTD in 2021

The first phase of Making Tax Digital (MTD) saw the requirement for the digital submission of the VAT Return using compliant software. That’s now behi...

View resource