Accounting Not to Blame for Foreign Merger Woes.
When U.S. companies buy foreign companies, the result is usually a decrease in stock value, but the problem isn't is·n't
Contraction of is not.
isn't is not
isn't be because of different accounting methods, according to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. a recent study presented at the American Accounting Association Globalization globalization
Process by which the experience of everyday life, marked by the diffusion of commodities and ideas, is becoming standardized around the world. Factors that have contributed to globalization include increasingly sophisticated communications and transportation Conference in Berlin.
The research was conducted by two University of Arkansas The University of Arkansas strives to be known as a "nationally competitive, student-centered research university serving Arkansas and the world." The school recently completed its "Campaign for the 21st Century," in which the university raised more than $1 billion for the school, used professors -- Tommy Carnes, assistant professor of accounting, and Tomas Jandik, assistant professor of finance -- along with Ervin Black of Brigham Young University Brigham Young University, at Provo, Utah; Latter-Day Saints; coeducational; opened as an academy in 1875 and became a university in 1903. It is noted for its law and business schools. .
The researchers initially set out to see if differences in generally accepted foreign accounting principles were to blame for the widespread failure of cross-border mergers.
The conclusion? The opposite was true. U.S. companies that bought foreign companies with similar accounting systems to our own had more problems than acquisitions that involved more exotic accounting systems.
"In the majority of instances, expansion of U.S. firms through acquisition of foreign targets is a value-destroying activity," the study concluded.
The researchers said the problem may be due to the higher cost of capital in foreign countries.
The researchers analyzed an·a·lyze
tr.v. an·a·lyzed, an·a·lyz·ing, an·a·lyz·es
1. To examine methodically by separating into parts and studying their interrelations.
2. Chemistry To make a chemical analysis of.
3. 361 cases in which U.S. companies acquired companies in 17 foreign countries between 1985 and 1995. Most of the research concerned the United Kingdom (24 percent), Canada (20 percent), France (15 percent) and Germany (11 percent).
Carnes said the average decrease in stock values of the 361 acquisitions studied was 2 percent one year after the merger, 13 percent after three years and 23 percent after five years.