We investigate if the different quality of the acquirer’s accounting standards (GAAP) affects the premiums paid in cross-border mergers and acquisitions (M&As). Following Bae et al. 2008, we compute an accounting diversity (AD) score as a proxy for the quality of the acquirer accounting system with respect to the US GAAP, assumed as benchmark. Considering a sample of cross-border M&As completed between 1990 and 2015 only with US listed targets, we show that premiums paid are higher than in domestic M&As and they increase with the acquirer AD. Since a higher AD implies less effective shareholder monitoring and governance controls, high-AD acquirers have more room and incentives for an “empire building” behavior. Our results support the hubris and agency hypotheses, and the idea that high-quality GAAP could benefit investors by improving the corporate governance mechanisms.

Accounting diversity and premium in cross-border M&As / Ferrari, Mascia; Momente, Francesco; John, Kose; Clemenza, Cristina. - (2018). ((Intervento presentato al convegno AAA2018 Pathways to a Sustainable Future tenutosi a Washington DC USA nel 3-8 Agosto 2018.

Accounting diversity and premium in cross-border M&As.

Mascia Ferrari
;
2018

Abstract

We investigate if the different quality of the acquirer’s accounting standards (GAAP) affects the premiums paid in cross-border mergers and acquisitions (M&As). Following Bae et al. 2008, we compute an accounting diversity (AD) score as a proxy for the quality of the acquirer accounting system with respect to the US GAAP, assumed as benchmark. Considering a sample of cross-border M&As completed between 1990 and 2015 only with US listed targets, we show that premiums paid are higher than in domestic M&As and they increase with the acquirer AD. Since a higher AD implies less effective shareholder monitoring and governance controls, high-AD acquirers have more room and incentives for an “empire building” behavior. Our results support the hubris and agency hypotheses, and the idea that high-quality GAAP could benefit investors by improving the corporate governance mechanisms.
AAA2018 Pathways to a Sustainable Future
Washington DC USA
3-8 Agosto 2018
Ferrari, Mascia; Momente, Francesco; John, Kose; Clemenza, Cristina
Accounting diversity and premium in cross-border M&As / Ferrari, Mascia; Momente, Francesco; John, Kose; Clemenza, Cristina. - (2018). ((Intervento presentato al convegno AAA2018 Pathways to a Sustainable Future tenutosi a Washington DC USA nel 3-8 Agosto 2018.
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Utilizza questo identificativo per citare o creare un link a questo documento: http://hdl.handle.net/11380/1168469
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