M & Payment, Earnings Management And Acquisition Performance

With the continuous development of China’s capital market, earnings is gettingmore and more attentions by the masses. From many financial fraud cases in othercountries, it is easy to find that there is the motive for earnings management and evenillegal fraud in the interest driven by the management. Because the earningsmanagement may lead to serious economic consequences, academia has done researchon earnings management from different aspects, including specific events in the IPO,seasonal issuance of shares, affiliated transactions, etc. As the eternal topic in thecapital market, M&A always attracts people’s attention. Research on M&A, M&Aperformance and other aspects has been a hot issue in the field, but few concern theearnings management of enterprise in M&A. The payment methods is an importantpart of M&A. Different selections of payment methods affect not only the acquisitionof two financial arrangements and the balance of power in corporate control, but alsothe motive and means of M&A differs from different methods of payments, which willaffect the performance of the company after the merger. Can Chinese investors see theearnings management in M&A? Can the performance of M&A change because ofearnings management before the M&A? With the diversification of China’s payment,what are the differences between the earnings management behavior of mergers andacquisitions in the different payment methods？Companies have earnings management behavior in M&A. Because of differentmotives of earnings management, they will choose different methods of payment formergers and acquisitions. The merger is single before the2006in China, there is noearnings management research includes the convertible way. Along with thedevelopment of the payment way of China’s M&A transactions, this paper hopes toresearch the behavior of earnings management research in M&A. In this paper, thereare three main distinctions, including cash payment, stock payment and other payment.In this paper, we use the listing corporation data in year2008-2011and discretionaryaccruals as a proxy for earnings management, characteristics of earnings management behavior of different payment modes and the performance of M&A. The study foundthat listing corporations prefer positive earnings management in the year before the M&A, earnings management behavior has a significant negative effect on theperformance of M&A. Share payment under this phenomenon is more obvious, perfectcorporate governance can effectively restrain the negative effects of earningsmanagement. Investors should pay attention to this fact, the regulatory shouldstrengthen supervision on M&A, improve the relevant system of governance structure,manage the capital market and guide investors.