Impact Of Mergers And Acquisitions On Earnings Quality

With the development of economic globalization, there appears to be an inevitable trend in the international industry trend that corporations seek the resource integration and broad market spaces all over the world. In this context, the mergers and acquisitions have become norms of corporations. In the process of this kind of economic activities, investors have more demands for accounting information of corporations in order to ensure the investing profits. The earnings quality is employed to analyze the accounting information or help decision-making. In other words, the accounting information of accounting work should promote the development of corporations and benefit outside investors. However, the separation of ownership and control of modern corporations as well as the influence of principal-agent relationship between shareholders and managers can give rise to a dangerous situation: chances are that managers sacrifice the interests of shareholders to pursue their goals.The paper employs the low-frequency event of mergers and acquisitions of listed companies to investigate the influence of the low-frequency event on the earnings quality of listed companies in an empirical way. We predict that after m&a events, m&a companies rationally keep a low profile and employ the way of decreasing earnings quality to avoid or reduce the suck cost resulting from the fluctuations of stock price. By analyzing matched-pairs samples, we find that compared with non- merged firms, m&a companies have significant declines in earnings quality after mergers and acquisitions. Moreover, m&a companies attempt to illustrate the influencing mechanism from the corporate governance, make investors fully aware of the impacts of mergers and acquisitions on companies and invest most effectively.