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

Posted: 13 Jun 2019

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 - Fox School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: March 1, 2019

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 (March 1, 2019). Journal of Accounting Research, Vol. 57, No. 1, 2019. Available at SSRN: https://ssrn.com/abstract=3396065

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 - Fox School of Business ( email )

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

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