Do Firms Purchase the Pooling Method? Academic Article

abstract

• We investigate two related questions. What factors influence firms' use of acquisition accounting method, and are firms willing to pay higher acquisition premiums to use the pooling-of-interests accounting method? We analyze a comprehensive sample of nontaxable corporate stock-for-stock acquisitions from 1990 through 1996. We use a two-stage, instrumental variables estimation method that explicitly allows for simultaneity in the choice of accounting method and acquisition premiums. After controlling for economic differences across pooling and purchase transactions, our evidence indicates that financial reporting incentives influence how acquiring firms structure stock-for-stock acquisitions. In addition, our two-stage analysis indicates that higher acquisition premiums are associated with the pooling method. In sum, our evidence suggests that acquiring firms structure acquisitions and expend significant resources to secure preferential accounting treatment in stock-for-stock acquisitions. 2002 Kluwer Academic Publishers.

authors

• Robinson, John

published proceedings

• Review of Accounting Studies

author list (cited authors)

• Ayers, B. C., Lefanowicz, C. E., & Robinson, J. R.

citation count

• 69

complete list of authors

• Ayers, Benjamin C||Lefanowicz, Craig E||Robinson, John R

publication date

• January 2002

publisher

• Springer Nature  Publisher

published in

• Review of Accounting Studies  Journal

keywords

• Accounting Choice
• Corporate Acquisitions
• Pooling-of-interests Accounting

Digital Object Identifier (DOI)

• 10.1023/a:1017941313169

start page

• 5

end page

• 32

volume

• 7

issue

• 1

URL

• http://dx.doi.org/10.1023/a:1017941313169