A Review of the Financial Reporting and Governance Impacts of Business Combinations

Muhammad Saleem Ullah Khan; Said Khalfan Salim Al-Amri; Farkhanda Rauf

A Review of the Financial Reporting and Governance Impacts of Business Combinations

Author(s)	Muhammad Saleem Ullah Khan, Said Khalfan Salim Al-Amri, Farkhanda Rauf
Country	Oman
Abstract	Mergers and acquisitions are one of the main forms of activity in the world of business that alters the shape of industries. Nevertheless, accounting and reporting in M&As are intricate since they bear repercussions for information release and corporate governance. This paper aims to discuss the findings of empirical research in the area of business combinations on the financial reporting and governance practices. Problems arising from business combinations and their effects on the financial reports are explored methodically. There is empirical evidence suggesting positive findings in the areas of value relevance and earnings quality after the implementation of IFRS 3. There is also evidence on merger and the outcome that financial statement comparability rises as there is reduced information asymmetry. It is stated that only short-term minimizing effect on conservatism is observed in the process of integration. There are still issues with Purchase Price Allocation, Goodwill and other intangibles impairments and with pro-forma financial disclosures. This paper discovers that acquisitions have effects on corporate governance by altering the ownership rights, boards of directors, and the contracts for managing directors. Existing studies find that monitoring rises with concentrated ownership after M&As occur for the firms. Best practice, such as independent boards and deal governance procedures like the fairness opinions are associated with improved shareholders’ returns and operating performance. Still, some potential costs of acquisitions are associated with managerial entrenchment if businesses acquire are unrelated to the company’s core competencies. Therefore, it can be summarized that business combinations affect the quality of financial reporting either positively or negatively in the short-run. The paper also shows that better governance leads to lower long-term integration costs. Focusing on solving issues that have to do with purchase price accounting and pro-forma disclosures can one enhance the undertaking of benefits. More future research should look into the complexity of the sample, the regulatory structures, as well as the types of deals for more information to the policymakers and practitioners.
Keywords	Mergers and acquisitions, Business combinations, Financial reporting, Corporate governance, Ownership structure.
Field	Business Administration
Published In	Volume 7, Issue 2, March-April 2025
Published On	2025-03-11

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A Review of the Financial Reporting and Governance Impacts of Business Combinations

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