Earnings manipulation in acquiring companies: An overview

This study addresses earnings manipulation actions under certain circumstances. Many studies have shown that bidding companies experience abnormal negative returns after undertaking bids. This anomaly requires an explanation from an accounting perspective, as a linkage between accruals and stock returns would yield insight into such observations. This paper addresses earnings manipulation in general and in the context of takeover bids, describes potential factors related to mergers and acquisitions, and suggests a methodology to provide empirical evidence to explain the decline in bidding companies' performance post takeover that causes abnormal negative returns. This study seeks to extend earnings manipulation studies using a takeover perspective and suggests a link between accounting policies around a takeover and stock return behaviour during the same period.

https://www.abacademies.org/articles/aafsjvol16320...