How Accounting Comparability Between Bidders and Targets Affects Deal Outcomes

How comparable are the financial statements of M&A bidders and acquirers in the same industry? And does financial statement comparability affect the outcome of a deal? In a recent paper, available here, we investigate these questions, using a sample of deals between U.S.-listed firms over the 1987-2021 period.

An accounting system maps economic transactions onto financial statements (Yip and Young, 2012). Accounting comparability reflects the tendency of two firms that have comparable accounting systems to produce similar (or dissimilar) financial statements for a given set of similar (or dissimilar) economic events (De Franco et al., 2011; Barth et al., … Read more