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Analysis of the Impact of Information Asymmetry and Transparency in Financial Statements on the Choice of Terms of M&A Deals

Student: Vladislav Shukaylov

Supervisor: Alexey S. Makarov

Faculty: Faculty of Economics

Educational Programme: Finance (Master)

Year of Graduation: 2021

This study, conducted on a broad sample of 2 452 companies that operate on developing markets, documents that income-increasing earnings management methods used by bidder companies in the year immediately preceding mergers and aquisitions deals significantly increases the probability of deal payment all or partially in stock. This study also provides evidence that the usage of a combination of different methods of manipulation of the value of the company by the bidder companie`s management before announcing the M&A transaction significantly increases the probability of deal payment all or partially in stock. We interpret our results as follows: the management of bidder companies in emerging markets is able to use the low level of development of regulatory institutions to their advantage, reducing the costs of M&A transactions by using methods of manipulating the financial result of the company. The results of this study can be used by researchers who are interested in studying the impact of low development of financial institutions that exercise regulatory control over the financial statements of companies and, as a result, of a low level of financial reporting transparency and a high level of information asymmetry on well-studied aspects of Western financial systems, such as M&A transactions.

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