Resolving Information Asymmetry Through Contractual Risk Sharing: The Case of Private Firm Acquisitions

• 成果类型: Article
• 署名作者: Jansen, Mark
• 署名单位: Utah System of Higher Education; University of Utah
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/1475-679X.12335
• 发表日期: 2020
• 页码: 1203-1248
• 关键词: financial statement verification; Audit quality; reporting quality; acquiring firms; AGENCY COSTS; disclosure; INVESTMENT; valuation; earnouts; MARKET

摘要

When private firms are acquired, buyers commonly rely on seller financing and earnouts. Using a novel database of private acquisitions, I find that seller financing and earnouts become more common as information asymmetry increases between the acquirer and the target. Financial statement audits of the targets attenuate these results, which suggests that audits decrease information asymmetry in firm acquisitions. Seller-financed acquisitions also close faster and at higher prices, reducing the private firm discount. These findings suggest that these contract structures are an important channel through which privately held firms mitigate adverse selection that arises from information asymmetry.