@article{7dded733554e4510b410c6722a817226,
title = "The Disciplinary Role of Financial Statements: Evidence from Mergers and Acquisitions of Privately Held Targets",
abstract = "This study examines whether requiring the disclosure of audited financial statements disciplines managers{\textquoteright} mergers and acquisitions (M\&As) decisions. When an M\&A transaction meets certain disclosure thresholds, the Securities and Exchange Commission (SEC) requires the public acquirer to disclose the target's audited financial statements after the merger is completed. Using hand-collected data, I find that the disclosure of private targets{\textquoteright} financial statements is associated with better acquisition decisions. Furthermore, I find that this disciplining effect of disclosure is more pronounced when monitoring by outside capital providers is more difficult and costly, and when other disciplining mechanisms are weaker. Finally, these findings are robust to several alternative explanations, such as monitoring from blockholders and voluntary disclosures. In sum, the evidence suggests that the ex post mandatory disclosure of private targets{\textquoteright} accounting information disciplines managers{\textquoteright} acquisition decisions and improves acquisition efficiency.",
keywords = "G34, M40, M41, M48, disciplinary role, disclosure, mergers and acquisitions, private firms",
author = "Chen, \{Ciao Wei\}",
note = "Accepted by Douglas Skinner. This paper is based on my dissertation completed at the University of Iowa. I am indebted to my dissertation cochairs Dan Collins and Rick Mergenthaler for their invaluable guidance and support. I thank my dissertation committee members Paul Hribar, Dave Mauer, and Anand Vijh for their helpful feedback. I also received constructive comments and suggestions from Darren Bernard, Nerissa Brown, Dave Burgstahler, Ted Christensen, Rich Frankel, Cristi Gleason, Brad Hepfer, Todd Kravet, David Koo, Laura Li, Xiumin Martin, Sarah McVay, Mike Minnis, Michelle Nessa, Phil Quinn, Steven Savoy, Abbie Smith, Theo Sougiannis, Steve Stubben, Oktay Urcan, an anonymous referee, and workshop participants at Arizona State University, College of William and Mary, ESSEC Business School, HEC Paris, Texas A\&M University, University of Arizona, University of Arkansas, University at Buffalo, University of Connecticut, University of Illinois at Chicago, University of Illinois at Urbana–Champaign, University of Iowa, University of Georgia, University of Nebraska, University of Utah, University of Washington, and Washington University in St. Louis, and conference participants at the 2018 Journal of Accounting Research conference. I thank Amit Shah and Sarah Xiao for their excellent research assistance. All the data are publicly available from the sources indicated in the paper. I gratefully acknowledge generous financial support from University of Illinois at Urbana–Champaign, the Gies College of Business, and the Tippie College of Business at the University of Iowa. An online appendix to this paper can be downloaded at: http://research.chicagobooth.edu/arc/journal-of-accounting-research/online-supplements.",
year = "2019",
month = may,
doi = "10.1111/1475-679X.12256",
language = "English (US)",
volume = "57",
pages = "391--430",
journal = "Journal of Accounting Research",
issn = "0021-8456",
publisher = "Wiley-Blackwell",
number = "2",
}