The substantial changes in the corporate governance mechanism of acquired firms
that take place during the periods surrounding corporate acquisitions lead investors
and other corporate financiers to an intensive search for financial accounting inputs
for decision making. We examine whether financial accounting information on takeover
targets provides useful input in the corporate governance mechanisms of US publicly
traded takeovers in these periods. Our analysis is by four different types of acquirers:
foreign firms, publicly traded US firms, private US acquirers, and leverage buyouts
(LBOs). We expect that certain firm-specific financial accounting characteristics of takeover
targets by type of potential acquirer affect valuation. To examine this expectation
we construct a probability summary-value measure, composed of eight financial
accounting variables, based on the type of acquirer. We also expect the probability