790
standard, a finance lease was accounted for as a purchase-with-loan. Note, however, that this standard allowed lessees to avoid capitalizing the type of finance lease that
did not transfer ownership of the property to the lessee by the end of the lease term. Because firms preferred this off-balance treatment, most finance-lease users arranged
lease contracts so as not to be obliged to capitalize them. Lessees that do not capitalize finance leases are instead required to disclose
capitalized information such as the present value of lease liabilities, the acquisition cost of lease assets, the book value of lease assets after depreciation, the amount of
their lease rentals, and depreciation expenses on lease assets and interest expenses on lease liabilities in the footnotes of their financial statements. Users whose lease
liabilities are less than 10 of the sum of the book value of their PPE and their lease liabilities
91
are also allowed to use a concise footnoting method for disclosing their capital leases. This method allows users to substitute the gross amount of their lease
rentals for the present value of the measurement of lease assets and liabilities. In this case, the book value of lease assets and liabilities is the gross amount of the lease
In the U.S., the revenue measurement for sales-type leases is to be separated from that of direct financing leases whereas in Japan, we treat both types of leases as finance leases.
However because this paper focuses on the earnings of lessees, this makes no difference to my argument.
91
10
Liability
Lease PPE
of V
B Liability
Lease
791
rentals added to the interest expense on lease liabilities. Note as well that this information will not appear in the footnotes because the book value of liabilities is the
gross amount of lease rentals and the interest rate considered in the measurement is set at zero. We call the gross amount method the ―interest-inclusive method‖ and the
discounted method i.e. the measurement method that excludes interest the ―interest- exclusive method.‖
In order to calculate purchase-treatment earnings, we need the information available in the footnotes via the ―interest-exclusive method.‖ Here, the adjusted
earnings are calculated by adding rental payments back to the reported earnings on income statements and subtracting the depreciation expense of leased assets and the
interest expense of lease liabilities.
3 Previous Research
There is a great deal of capital-market research focused on lease accounting. Most fall into one of two categories: the first category investigates the effect of the adoption
of ASR No.147 1973 and SFAS No.13 1976 on capital markets. ASR No.147, an SEC regulation in effect until 1976, ruled that because most leases were not capitalized,
finance leases known as capital leases under SFAS No. 13 were to be disclosed. As such, ―as-if‖ capitalized financing lease information the present value of lease rentals,
interest rate implicit in computing the present value, and the impact on net income was available under ASR No.147, and ―as-if‖ capitalized operating lease information the
future minimum lease payments and rental expenses for each period for which an
792
income statement was presented
92
was available under SFAS No.13. Murray 1981 investigated the market reaction associated with moving lease disclosures from
footnotes to the body of financial statements and found that there was no reaction to this change in accounting rules. This finding implies that disclosure in footnotes is of
equal value to recognition on balance sheets. The second area of research investigates the value relevance of footnote
information, i.e. financing lease information under ASR No.147 and operating lease information under SFAS No.13. Ro 1978 and Bowman 1980 show that markets
evaluate the footnote information of ―as-if‖ capitalized financing lease under ASR No.147. Ely 1995 and Lindsey 2006 examine the value relevance of footnote
information of ―as-if‖ capitalized operating leases under SFAS No.1γ and show that in general, footnote information on leases is evaluated in determining stock price. Note
that all of the above research focuses only on the balance sheet effect of capitalization. There is very little research on the earnings effect of capitalization. Under
current U.S. GAAP, the earnings effect of ―as-if‖ capitalized operating leases is not available. ASR No.147 1973 required the disclosure of lease information having to do
with non-capitalized financing leases, such as the impact on net income if such leases had been capitalized. Ro 1978 investigated the market reaction associated with this
additional disclosure and showed that the difference between purchase and rental treatment was related to the distribution of returns on securities. Perhaps surprisingly,
92
FASB 1976, para.16
793
there is no research that compares the value relevance of earnings by purchase treatment with that of earnings by rental treatment. This paper therefore examines the
difference in the value relevance of earnings when finance leases are treated as purchases and when they are treated as rentals.
4 Developing Hypothesis and Research Design
As described above, the purpose of this paper is to compare the earnings value relevance between rental and purchase treatments by using a sample drawn from
Japan in which rental-treatment earnings are reported in the body of income statements and purchase-treatment earnings, which require calculation adjustments
derived data available in the footnotes.
There is empirical evidence that investors efficiently incorporate information derived both from footnotes and from the body of income statements Murray 1981, implying
that the former is not inferior to the latter. If adjustment earnings explain stock prices more fully than do earnings disclosed in the body of income statements, we can
reasonably infer that adjustment earnings offer more information than either of the other disclosure methods. Information offered as a result of the earnings-by-purchase-
treatment method offer data such as the lessees incremental borrowing rate not included in the earnings by rental treatment method. We can therefore expect that the
earnings of firms that disclose lease expenses via the purchase treatment have incremental explanatory power with respect to stock prices. The hypothesis is therefore
as follows:
794
H
1
: The earnings of firms that disclose lease expenses via the purchase-treatment methodology have incremental explanatory power with respect to stock prices.
Since this paper investigates the value relevance of earnings to stock prices, its model is based on the permanent-earnings-discount-model.
The relation between the market value of a firm‘s common equity and earnings is given by:
it pit
it
r E
MVE
1
Where MVE
it
is the market value of equity for firm i at year t,
pit
are expected permanent earnings for firm i at time t, and r
it
is the discount rate for firm i at time t. The net income includes operating profit, ordinary profit and contains transitory components
similar to extraordinary items in U.S. GAAP including ―special profits and loss‖ in Japanese GAAP. As such, I use the ordinary profit OP the sum of operating income
and financing income as the proxy variable for permanent earnings.
it it
OP it
it
INDUSTRY OP
D OP
P
2 1
2 I input the stock price of firm i at the fiscal year end of year t P
t
for the market value of equity. Note that positive and negative earnings typically have different coefficients. I
then consider the dummy variable for negative operating profit D
OP
. When OP has a negative value, D
OP
is assigned a value of one, otherwise it is set at zero.
it
is a categorical variable to control for the effect of industries in accordance with the industrial code provided by Nikkei NEEDS.
For the regression analysis for H
1
, regression 2 is modified as below:
795
it it
t PTit
it OP
it it
INDUSTRY OP
D OP
D OP
P
3 2
1
3 D
PT
denotes the dummy variable for purchase treatments that are described in footnotes. When the footnote information is disclosed through the interest-exclusive
method, D
PT
takes one, otherwise it takes zero. As we can expect that the earnings of firms that disclose lease expenses via the purchase treatment have incremental
explanatory power with respect to stock prices,
2
is expected to be different to zero. To avoid the heteroscedasticity problem, all variables are deflated by the prior stock
price P
t-1
. Under Japanese GAAP, the ―interest-exclusive method‖ is only used by firms
whose lease liabilities are more than 10 of the sum of the book value of their PPE and their lease liabilities
93
. I then compare the value relevance of earnings by rental treatment with that of
adjusted earnings by purchase treatment. Therefore: H
2
: The adjustment-ordinary profits garnered by using footnote information are more relevant to stock prices than are ordinary profits reflected on income
statements. If investors adjust ordinary profit by using information provided in the footnotes, the
regression formula can be modified as follows:
it it
it adjOPit
it it
INDUSTRY adjOP
D adjOP
P
2 1
4
93
Note that I cannot deny the possibility that D
PT
of regression 5 could be a proxy for something related to incentives for leases.
796
Where adjOP is calculated by adding lease rental paymentsback into the ordinary profit reported on the income statement and by reducing the depreciation expense on lease
assets and interest expense on lease liabilities. adjOP=OP + lease rentals - deprecation expenses on lease assets + interest expenses on lease liabilities. To
assess the relative explanatory power of ordinary profits and adjusted ordinary profits, I adopt the Vuong test that tests the superiority and inferiority between the models
94
. I then compare the explanatory power of adjOP
t
with OP by using the Vuong test for H
2
.
5 Empirical Results
The sample consists of firm-year observations from 2000 to 2006 pertaining to all Japanese stock markets. I obtained data based on the following criteria: data were to
1 be from non-financial firms only, 2 have a fiscal year ending March 31
95
, and 3 have no missing values for any of the variables. Accounting figures and stock prices on
March 31 were obtained from Nikkei NEEDS. OP was extracted from income statements and ―as-if‖ capitalized lease expenses were extracted from footnotes. All
variables were calculated per share and deflated by prior stock value P
t-1
. I created a dummy variable for firms that disclose finance lease expenses in
footnotes via the interest-exclusive treatment D
PT
. When a firm discloses the interest
94
See Ota and Matsuo 2004.
95
In Japan, the typical end of the fiscal year is March 31. When the stock market was closed on March 31, I took the stock prices from the last day of March during which the market was open.
797
on financing lease rentals, i.e. the firm has disclosed both depreciation expense and interest expense it has treated the lease as if it were a purchase,
D
PT
takes one, and zero otherwise. I also created a dummy variable for finance lease users D
FL
that takes one when a firm discloses financing lease rentals and takes zero otherwise.
Panel A of Table 1 summarizes the descriptive statistics of each variable. The mean of D
FL
shows the proportion of the finance-lease users in the sample. The table shows that approximately 95 of the sampled firms use finance leases. This might be
evidence that finance leases are very common in Japanese firms because lessees can take off-balance sheet treatment and because firms prefer finance leases to
purchases-with-loan. From the perspective of tax savings, the amount of a finance lease disbursed can be allocated over a shorter period than in the case of a ―purchase-
with-lo an,‖ under the condition that the sum of the finance lease rentals are equal to
that of ―purchase-with- loan,‖ or installment purchases. The mean of the D
PT
is approximately 35. Firms disclosing the interest paid in financing lease rentals are
disclosing information via the ―interest-inclusive method.‖ In this case, D
PT
takes one, and zero otherwise. The mean of D
PT
therefore shows the proportion of firms in the sample that use the interest-inclusive method. The results imply that not all finance
lease users disclose information via the interest-inclusive method. Note as well that the difference between OP and adjOP is very subtle. The fact that
the ratio of disclosure of information with respect to purchase treatment is only 35
798
means that there is no difference in 65 of the sample. The substantial difference of OP and adjOP can be seen in Panel B of Table1.
Table 2
96
shows the results of regression 2 by using the sample for 2000 to 2006. The coefficient on D
PT
OP
t 2
is significantly different to zero at the 5 level in 2002 and at the 1 level in 2003. This result shows that D
PT
is not always related to stock price, because the coefficient on D
PT
OP
t
is not consistently significant over the sample period.
Table 3 shows the results of the Vuong-test for regressions 3 and 4 using samples from 2000 to 2006. This table shows that adjusted ordinary profits do more to
explain stock prices than do ordinary profits on income statements in 2003 at the 10 level. Note that in other years there is no significant difference between the explanatory
power of ordinary profits and that of adjusted ordinary profits. In 2003, H1 is supported at the 1 level and H2 is supported at the 10 level.
These results imply that investors utilize the information only in very specific situations. One reason considered is the change in accounting standards for lease amendments.
The ASBJ organized the committee that deliberated over lease accounting in July of 2002. The aim of the committee was to make finance lease users capitalize finance
leases. As such, investors may have regarded finance leases as purchases in March of 2003. This scenario, however, leaves us with the following problem: Why is it that in
96
The table omits results of my controlling for the effect of industries in which I use the dummy variables.
799
2004 and afterwards, adjusted ordinary profits do not do more to explain stock prices than do ordinary profits?
Table 4 shows another reason considered. This table shows interest rates for finance leases and newly issued government bond yield from 2000 to 2006. The
interest rates of finance lease are roughly calculated as the average of the finance lease interest rates interest expenselease liabilities of the firms that disclose footnote
information via the purchase treatment. The table shows that the interest rate in 2003 was generally lower than in other years and that the interest rate on finance leases in
2003 was not as low as in other years studied. Since finance lease contracts are non cancellable, lessees can not refinance lease debts even though the interest rate is very
low. This might imply that investors make a c ertain evaluation with respect to lessees‘
inability to refinance and did so particularly in 2003.Future studies examining the relationship between economic circumstances particularly interest rates and
economic function of leases will clarify the validity of these proposed arguments.
6 Conclusions
The purpose of this paper is to compare the earnings value relevance between rental and purchase treatments, i.e. to examine whether the capitalization of operating
leases is appropriate in terms of income measurement rather than as recognition on balance sheets. Because the information on the ―as-if‖ purchase treatment of
operating leases is not disclosed, the difference in the value relevance between the rental and purchase treatment of finance leases is examined in order to obtain
800
implications for operating leases. The results show that the value relevance of earnings-via purchase treatment rather than by rental treatment is significantly higher
only in 2003. This might imply that investors utilize footnote information only in particular situations, as described above. The two scenarios discussed above have
different implications with respect to the FASBIASB project. If we assume that investors only used footnote information in 2003 because of the accounting
amendment, we can assume that the 2003 experience left investors believing that using footnote information was not useful. This would imply that earnings as
described via the purchase treatment are not as useful as standard-setting bodies imagine they will be.
On the other hand, if we assume that investors made a certain evaluation with respect to finance lease users because of the lower interest rate, the purchase
treatment of finance leases can be imagined to offer more information relevance to the stock value than the rental treatment does.
Although it is important to expand this implication carefully in order to evaluate the relevance of capitalization of operating leases, this paper offers serious implications
for the FASBIASB project.
801
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Contracts, FASB.
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εurray D. 198β, ―The Irrelevance of δease Capitalization,‖ Journal of Accounting, Finance and Auditing, Vol. 5, No.3, pp.154-159.
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Sakai, E . β005, ―Accounting for δeases –The Rationality of Finance δease,‖ Kaikei,
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Wojdak 1969, ―A Theoretical Foundation for δeases and Other Executor Contracts,‖ Accounting Review, July.
803
EXHIBIT 1 Variable Definitions
P
t
= The market value of equity at the end of March in year t. OP
t
= The operating profits reported as described in the income statement of year t adjOP
t
= Operating profit recalculated by adding the lease rentals back in and reducing the depreciation expense on lease assets and the interest expense on lease
liabilities D
OP
= The dummy variable for negative operating profits D
PT
= The dummy variable for purchase treatment in footnotes
804
Table 1 Descriptive Statistics Panel A
Descriptive Statistics for variables
2000 Mean
Median Max
Min S.D.
Sum N
Pt 1.118
0.936 8.654
0.294 0.703
1887.856 1689
OP 0.0824
0.0781 0.873
-0.935 0.129
139.250 1689
adjOP 0.0826
0.0780 1.050
-0.935 0.130
139.570 1689
FL firm 0.958
1.000 1.000
0.000 0.201
1618.000 1689
PT firm 0.323
0.000 1.000
0.000 0.468
545.000 1689
2001 Mean
Median Max
Min S.D.
Sum N
Pt 0.968
0.937 5.802
0.004 0.354
1648.680 1703
OP 0.1113
0.1019 1.013
-2.179 0.157
189.559 1703
adjOP 0.1114
0.1015 1.050
-2.179 0.157
189.691 1703
FL firm 0.958
1.000 1.000
0.000 0.200
1632.000 1703
PT firm 0.327
0.000 1.000
0.000 0.469
557.000 1703
2002 Mean
Median Max
Min S.D.
Sum N
Pt 0.888
0.885 6.023
0.096 0.286
1539.647 1734
OP 0.0680
0.069 1.947
-2.058 0.171
117.836 1734
adjOP 0.0681
0.069 1.947
-2.058 0.171
118.063 1734
FL firm 0.954
1.000 1.000
0.000 76.309 1654.000
1734 PT firm
0.341 0.000
1.000 0.000
389.887 592.000 1734
2003 Mean
Median Max
Min S.D.
Sum N
Pt 0.880
0.868 3.026
0.001 0.304
1526.768 1734
OP 0.1077
0.0973 3.453
-1.141 0.188
186.680 1734
adjOP 0.1078
0.0973 3.453
-1.139 0.188
186.907 1734
FL firm 0.945
1.000 1.000
0.000 0.228
1639.000 1734
PT firm 0.356
0.000 1.000
0.000 0.479
617.000 1734
Panel A continued
2004 Mean
Median Max
Min S.D.
Sum N
Pt 1.754
1.544 17.720
0.038 0.959
3005.070 1713
OP 0.1664
0.1397 5.061
-0.980 0.221
284.967 1713
adjOP 0.1664
0.1397 5.061
-0.981 0.221
285.115 1713
FL firm 0.946
1.000 1.000
0.000 0.227
1620.000 1713
PT firm 0.361
0.000 1.000
0.000 0.480
618.000 1713
805
Panel B The absolute mean value of the difference between OP and adjOP
2000 2001
2002 2003
2004 2005
2006 0.00156 0.00121 0.00130 0.00120 0.00145 0.00086 0.00026
The difference = | adjOP-OP| Sum of PTfirms 2005
Mean Median
Max Min
S.D. Sum
N Pt
1.196 1.121
12.718 0.130
0.547 2072.899
1733 OP
0.1168 0.1076
1.432 -2.489
0.128 202.378
1733 adjOP
0.1169 0.1076
1.432 -2.489
0.128 202.508
1733 FL firm
0.938 1.000
1.000 0.000
0.241 1626.000
1733 PT firm
0.359 0.000
1.000 0.000
0.480 622.000
1733 2006
Mean Median
Max Min
S.D. Sum
N Pt
1.396 1.281
30.738 0.154
0.964 185.343
1745 OP
0.1062 0.1024
1.124 -0.567
0.093 2436.303
1745 adjOP
0.1063 0.1025
1.124 -0.567
0.093 185.4815
1745 FL firm
0.954 1.000
1.000 0.000
0.210 1615.000
1745 PT firm
0.341 0.000
1.000 0.000
0.474 632.000
1745
806
Table 2 The examination of incremental explanatory power of footnote information
Regression 2
it it
OP it
it
INDUSTRY OP
D OP
P
2 1
2000 2001
2002 2003
2004 2005
2006 Intercept
1.200 1.065
0.740 0.946
1.117 0.702
0.776 3.56
6.573 6.101
6.083 2.761
3.32 1.86
OP 0.821
0.796 0.706
0.635 2.157
2.383 6.162
4.11 10.31
11.00 13.37
19.61 20.37
21.32 D
OP
OP 0.800
0.722 0.674
0.546 3.828
6.440 8.367
2.21 5.65
6.89 5.51
10.72 30.96
9.83 D
CL
OP 0.263
0.139 0.183
0.278 0.172
0.196 0.177
1.10 1.53
2.42 4.18
1.08 1.51
0.59 Adj.R
2
8.28 16.35
11.61 21.41
29.14 40.19
25.36
807
Table 3 Vuong test for regressions
Regression 3 Regression4
Reported Earnings in Income Statement Adjusted Earnings via footnotes
Rental Treatment Purchase Treatment
Intercept OP
D
OP
OP adjR
2
Intercept adjOP D
OP
adjOP adjR
2
Z- statistics
1.21 0.89
0.77a 8.27
1.21 0.85
0.72a 8.21
0.96 1.59
1.07 0.83
0.70 16.28
1.07 0.83
0.70 16.26
0.60 1.45
0.75 0.75
0.63 11.35
0.75 0.75
0.63 11.33
0.90 1.63
0.95 0.70
0.45 20.65
0.95 0.70
0.45 20.67
1.64 0.10
1.12 2.20
3.78 29.13
1.12 2.20
3.76 29.10
1.10 1.73
0.71 2.45
6.34 40.14
0.71 2.45
6.34 40.18
1.59 0.11
0.78b 6.23
8.41 25.39
0.77b 6.23
8.41 25.41
0.96 1.59
Regression 3
it it
OP it
it
INDUSTRY OP
D OP
P
2 1
Regression 4
it it
it adjOPit
it it
INDUSTRY adjOP
D adjOP
P
2 1
All interceptions and coefficient except a and b are significantly different to zero at the 1 level. a: The estimators are significantly different to zero at the 5 level.
b: The estimators are significantly different to zero at the 10 level.
808
Table 4 Newly Issued Government Bonds Yield
2006 2005
2004 2003
2002 2001
2000 Interest Rate for Finance Leases
3.41 3.33
3.84 3.58
4.44 4.11
4.40 Newly Issued Government Bonds Yield
1.77 1.32
1.44 0.70
1.40 1.27
1.77
809
MA GOODWILL ACCOUNT ING: ―THOSE ARE MY PRINCIPLES, AND IF YOU DO
NOT LIKE THEM...‖ Humberto R Ribeiro
97
Abstract – The accounting for business combinations has been a fertile source of
controversies, to which the accounting for goodwill generated from Merger Acquisitions MA has made major contributions. Practitioners continue to suffer
amidst industry lobbying versus regulators quarrels, and therefore one can argue that in εA goodwill accounting: ―Those are my principles, and if you do not like them ... …
well, I have others‖, as Groucho εarx would say. The replacement of amortisation of purchased goodwill and other intangible assets with
definite life by impairment tests continues to raise concerns and therefore remains an accounting issue. Several authors, such as Hayn Hughes 2006, questioned the
superiority of impairment tests over amortisations, while Massoud Raiborn 2003 suggested that managerial discretion in applying the goodwill impairment tests reduces
the quality of reported earnings. Massoud Raiborn 2003 also argued that SFAS No. 142 creates opportunities for earnings management, particularly in weak economic
periods, where companies can undertake a ―big bath‖, i.e., to recognise big impairment losses in a period when earnings are already negatively affected.
The early β000‘s was characterised by an economic downturn, which has resulted in a recession in the USA in the period between March and November 2001, as defined by
the National Bureau of Economic Research NBER. The dot.com bubble collapse, the September 11 attacks, and the numerous accounting and corporate scandals that
resulted in the Sarbanes-Oxley act, are some of the events that could arguably trigger
97
The author is Associate Professor of Financial Accounting, Bragança Polytechnic Institute, Portugal, and is developing
research at Leicester Business School, De Lontfort University, UK .Correspondence address: Escola Superior de Tecnologia e de Gestão, Apartado 11γ4, Campus de Sta. Apolónia, 5γ01-857 Bragança, Portugal, E-mail:
hn2rptgmail.com .
810
the recognition of massive losses following impairment testing in fiscal years 2001 and 2002. Significant impairment losses under SFAS 142 could only occur from fiscal year
2002 onwards, as this standard was first adopted in fiscal year 2002 by most companies. Unsurprisingly, a big bath earnings management has occurred in 2002, as documented
in the accounting and financial literature. There is however another fact that may have eased the happening of this ―big bath‖: the change in the accounting regulation itself,
which has diluted the negative impact on corporate earnings due to impairment charges. A big bath earnings management has occurred in 2002, as documented in the
accounting and financial literature see e.g. Jordan Clark, 2004, 2005. There is however another fact that may
have eased the happening of this ―big bath‖: the change in the accounting regulation itself, which has diluted the negative impact on corporate
earnings due to impairment charges. By the means of financial reporting disclosures analysis, this paper examines several aspects of SFAS 142 adoption, namely its
significant impact on corporate earnings reported in the USA.
1. Introduction
Before FASB‘s changes in accounting for business combinations in β001, the managerial accounting choice preference was clear in the mergers acquisitions field
MA: pooling of interests method, regardless its use being conditional to its qualification for a uniting of interests see e.g. Aboody et al., 2000; Anderson
Louderback III, 1975; Ayers et al., 2000, 2002; Copeland Wojdak, 1969; Gagnon, 1967; Lys Vincent, 1995; Nathan, 1988. Management wants to maximize results, and
purchase was not a suitable method, as it required goodwill recognition and amortisation, with negative consequences on earnings. Indeed, early studies found that
managerial discretion was used in business combinations accounting in order meet
811
financial reporting objectives, namely to maximize reported earnings Copeland Wojdak, 1969.
As referred before, this appetence for pooling of interests was excessive. In fact, diverse anecdotal and empirical evidence suggested that companies could reshape MA deals,
incurring in extraordinary expenses, and even paying higher acquisition premiums, simply to meet AICPA‘s APB Opinion 16 pooling of interests criteria see e.g. Aboody et
al., 2000; Ayers et al., 2002; Davis, 1990; Hopkins et al., 2000; Linsmeier et al., 1998; Lys Vincent, 1995; Robinson Shane, 1990; Walter, 1999; Weber, 2004.
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Despite the apparent advantages of pooling over purchase method, several studies detected that pooling method resulted in mechanical effects on companies‘ financial
statements and on the analysis of the financial statements Jennings et al., 1996; Vincent, 1997, while others documented that the short-window announcement returns
were lower for companies pooling than for companies using purchase method Davis, 1990; Hong et al., 1978; Martinez-Jerez, 2001.
According to Fields et al. 2001, whether shareholders benefit from managerial discretion and whether the benefits outweighed the costs is not clear. However,
according to Louis 2004, literature suggested that pooling deals are ―bad investment
decisions‖ because managers miss the focus on cash-flows, as they are more concerned with reporting increasing earnings, and also because they constraint the
management‘s ability to sell acquired assets after the acquisition Lys Vincent, 1995; Robinson Shane, 1990. Unsurprisingly, Martinez-Jerez 2003 found that stronger
negative market reaction to pooling MA deals is linked to acquirers that have poor corporate governance.
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Conversely, Nathan 1988 did not find higher acquisition premiums for companies applying the pooling of interests method.
