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Discussion of “Financial Statement Comparability and the Efficiency of Acquisition Decisions”
Author(s) -
Klein April
Publication year - 2018
Publication title -
contemporary accounting research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.769
H-Index - 99
eISSN - 1911-3846
pISSN - 0823-9150
DOI - 10.1111/1911-3846.12379
Subject(s) - comparability , financial statement , accounting , stock (firearms) , interpretation (philosophy) , economics , statement (logic) , financial statement analysis , empirical evidence , actuarial science , business , financial economics , financial ratio , political science , computer science , mathematics , engineering , law , epistemology , mechanical engineering , audit , combinatorics , programming language , philosophy
Chen, Collins, Kravet, and Mergenthaler (CCKM, [Chen, C.‐W., 2018]) is an empirical investigation of whether, after controlling for other known determinants of an acquirer's abnormal stock returns and expected and realized synergies, financial statement comparability impacts the investment decisions surrounding the acquirer's purchase of another company. The primary result is that higher financial statement comparability, as measured by De Franco, Kothari, and Verdi (DKV, [De Franco, G., 2011]), yields improvements on outcomes associated with mergers and acquisitions. This discussion presents some criticisms of the DKV measure as applied to this study; the main criticism being whether the DKV measure captures accounting comparability or the risk of the target firm. The empirical results presented in CCKM are consistent with both explanations, thus making it difficult to disentangle CCKM 's interpretation from an alternative explanation of their empirical findings.