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.