Prior studies suggest that stock acquirers manage their current accruals upward in the quarter immediately prior to the merger announcement. However, public scrutiny pressure and perceived litigation risk should limit acquirer ability and propensity to manage current accruals. In this paper, I first find that in comparison with cash acquirers, stock acquirers purposely report timelier accrued losses in the quarter immediately prior to the merger announcement. I also find that stock acquirers' discretionary current accruals exhibits an important feature of earnings quality, i.e. timely loss recognition. Finally, stock-for-stock and cash purchase mergers have diverse characteristics, and stock-for-stock mergers are associated with agency problems. The evidence in this paper suggests that discretionary current accruals of stock acquirers shrink and become indistinguishable from those of cash acquirers, after controlling for merger characteristics.
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