Disclosure Attributes, IFRS and Business Acquisitions : Evidence from Emerging- Market Multinationals’ Cross-Border Acquisitions

This study examines the association between the financial reporting regime of a target company and the disclosure attributes of the acquiring firm’s annual reports. We examine pre- and post- acquisition annual reports for emerging-market multinationals’ cross-border acquisitions deals, focussing on the length and readability of disclosure. Based on a sample of 835 firm-year observations for 171 deals, the study finds that acquirers with targets from countries applying International Financial Reporting Standards (IFRS) tend to disclose longer and less readable financial reports. We find that changes in disclosure attributes post-acquisition are associated with target nation adopting IFRS for domestic firms and requiring/permitting IFRS for foreign issuers. The findings incorporating a decomposition of informative and obfuscating components of narratives, supports the management narrative obfuscation hypothesis that textual attributes of disclosure are associated with incentives for more transparent disclosure even within the unique empirical setting where we consider two large developing countries which have continued to dominate the global cross-border acquisitions scene