Discretionary accruals in business combinations and the stock price

Abstract

This study aimed to evaluate the relationship of discretionary accruals in pre- and post-business combination periods in Brazil with the company's performance in the stock market in the same period. We used Kang and Silvaramakrishnan model (1995) and were calculated the averages of accruals in the pre- and post-business combination of the companies that have gone through the process of business combination with exchange of shares for the period 2011 and 2012. The results indicate that during business pre-combination periods there was a negative income management higher than that observed in subsequent periods. It was also checked that there is no statistically significant association between discretionary accruals, earnings per share and book-to-market from the pre-combination period with earnings per share of subsequent quarters to the business combination. We conclude that in the group of companies analyzed have not suffered the influence of discretionary accruals on the market performance of the acquiring companies.