Before completing an M&A transaction, acquiring firms conduct due diligence. This process provides acquiring firms with a more informed assessment of the expected costs, benefits, and risks of an acquisition and offers one last opportunity to renegotiate or terminate an M&A transaction. However,...

We study how monitoring and verification of accounting-based performance benchmarks influences the design and efficiency of earnout contracts. Earnouts are commonly used to resolve agency conflicts arising in mergers and acquisitions, but these contracts create measurement and other agency...

This study provides descriptive evidence on how the Financial Accounting Standards Board (FASB) sets Generally Accepted Accounting Principles (GAAP). Based on 211 financial accounting standards issued between 1973 and 2014, we summarize the reasons that the FASB adds or removes projects from its...

In this study, we investigate what makes up acquired goodwill and find that it consists of at least three distinct components: expected synergies from combining the assets of the target and acquirer, the going concern value of the target firm, and overpayment. We identify these components...

Before completing an M&A transaction, acquiring firms conduct due diligence. This process provides acquiring firms with a more informed assessment of the expected costs, benefits, and risks of an acquisition and offers one last opportunity to renegotiate or terminate an M&A transaction. However,...

Prior studies report a decline or no change in acquirers' profitability after a merger or business acquisition. Those studies, however, do not consider the downward impact on profitability that stems from use of the "purchase accounting" (and in later periods, "acquisition") method for business...

More than half of the 163 Statements of Financial Accounting Standards issued by the Financial Accounting Standard Board (FASB) between 1973 and 2007 were passed with dissenting votes. In this study, we investigate the factors associated with FASB board members' decision to dissent. We find that...

Under U.S. GAAP, firms recognize assets acquired in business combinations at fair value. Similarly, in taxable asset acquisitions firms adjust the tax basis of assets to fair value. Managers can increase the present value of future tax savings by allocating a greater portion of the purchase...