ACCTG 502 | Session 8 | The Information Content of Business Combination Disclosure Level

ACCTG 502 | Session 8 | The Information Content of Business Combination Disclosure Level - 2009 Ron Shalev Introduction: This study examines how the level of disclosures in business combinations relates to the acquirers' subsequent performance. It finds that acquirers with higher-than-expected disclosure levels tend to perform better in the future, as measured by return on assets (ROA) and abnormal stock returns. Conversely, firms that allocate unusually large portions of the purchase price to goodwill tend to disclose less information. These findings support disclosure theory, suggesting that managers selectively withhold unfavorable ("bad news") information. The study also shows that investors do not fully incorporate disclosure-level information immediately, especially reacting faster to negative abnormal disclosures. For both scholars and practitioners, the results highlight how strategic disclosure choices send hidden signals about acquisition quality and managerial confidence.