Effect of Firms' Acquisition Strategy on Earnings Management

Document Type : Research Paper



This study examines whether target firms manage their earnings upward in the period leading to their acquisition or not, using data on a sample of 46 firms listed in Tehran Stock Exchange for the period 1382-87. In this study, discretionary accruals were used as the proxy for earnings management, and we utilized the modified Jones model under balance sheet and cash flow approaches with some modifications to the balance sheet approach. The results show that there was no significant difference between discretionary accruals of target firms for the periods before and after acquisition, nor between discretionary accruals of target firms in the period before acquisition and those of firms in control group.


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