International Mergers and Acquisitions Laws, the Market for Corporate Control and Accounting Conservatism

73 Pages Posted: 31 Oct 2018 Last revised: 26 Nov 2018

See all articles by Inder K. Khurana

Inder K. Khurana

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business

Wei Wang

Temple University - Department of Accounting

Multiple version iconThere are 2 versions of this paper

Date Written: October 1, 2018

Abstract

Exploiting the staggered enactment of country-level mergers and acquisitions (M&A) law as an exogenous increase in corporate takeover threat, this paper examines how a disciplinary market for corporate control affects accounting conservatism. Following M&A law adoption, we find increased accounting conservatism, with more pronounced effects in countries with weak shareholder protection and in those experiencing larger growth in takeover activity. Further analysis reveals that elevated takeover threats increase conservatism through changes in capital structure and investment decisions as well as improvements in board monitoring. Our findings highlight the importance of the market for corporate control in shaping financial-reporting outcome.

Keywords: International M&A Laws, Takeover Threat, Accounting Conservatism, Corporate Governance

JEL Classification: G34, K22, M41

Suggested Citation

Khurana, Inder and Wang, Wei, International Mergers and Acquisitions Laws, the Market for Corporate Control and Accounting Conservatism (October 1, 2018). Fox School of Business Research Paper No. 18-043. Available at SSRN: https://ssrn.com/abstract=3263055 or http://dx.doi.org/10.2139/ssrn.3263055

Inder Khurana

University of Missouri at Columbia - Robert J. Trulaske, Sr. College of Business ( email )

331 Cornell Hall
Columbia, MO 65211
United States
573-882-3474 (Phone)
573-882-2437 (Fax)

Wei Wang (Contact Author)

Temple University - Department of Accounting ( email )

Alter Hall 450
1801 Liacouras Walk
Philadelphia, PA 19122
United States

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