This study investigates the role of financial reporting quality in merger and acquisition (M&A) deals that are ultimately terminated, i.e., go bust. If a target is a U.S. publicly-traded company, an acquirer's initial assessment of the potential benefits associated with the acquisition of the...

We investigate a tax avoidance strategy where firms use the ambiguity inherent in tax reporting to classify indirect costs as research and development (R&D) expenditures to take advantage of the R&D tax credit. We label this tax practice “strategic R&D classification”. We find a one standard...

This paper examines the association between ineffective internal control over financial reporting and the profitability of insider trading. We predict and find that the profitability of insider trading is significantly greater in firms disclosing material weaknesses in internal control relative...

This study provides descriptive evidence about 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 report the reasons that the FASB adds or removes projects from its...

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...

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...