Review of Accounting Studies

, Volume 7, Issue 1, pp 5–32

Do Firms Purchase the Pooling Method?

  • Benjamin C. Ayers
  • Craig E. Lefanowicz
  • John R. Robinson

DOI: 10.1023/A:1017941313169

Cite this article as:
Ayers, B.C., Lefanowicz, C.E. & Robinson, J.R. Review of Accounting Studies (2002) 7: 5. doi:10.1023/A:1017941313169


We investigate two related questions. What factors influence firms' use of acquisition accounting method, and are firms willing to pay higher acquisition premiums to use the pooling-of-interests accounting method? We analyze a comprehensive sample of nontaxable corporate stock-for-stock acquisitions from 1990 through 1996. We use a two-stage, instrumental variables estimation method that explicitly allows for simultaneity in the choice of accounting method and acquisition premiums. After controlling for economic differences across pooling and purchase transactions, our evidence indicates that financial reporting incentives influence how acquiring firms structure stock-for-stock acquisitions. In addition, our two-stage analysis indicates that higher acquisition premiums are associated with the pooling method. In sum, our evidence suggests that acquiring firms structure acquisitions and expend significant resources to secure preferential accounting treatment in stock-for-stock acquisitions.

corporate acquisitionsaccounting choicepooling-of-interests accounting

Copyright information

© Kluwer Academic Publishers 2002

Authors and Affiliations

  • Benjamin C. Ayers
  • Craig E. Lefanowicz
  • John R. Robinson

There are no affiliations available