Essays on the financial reporting and price implications of managerial ownership and contingent consideration in business acquisitions

In this dissertation I investigate whether the ownership interest of target firm managers is associated with target earnings management, and whether acquisition contingent consideration which extends the managers' payoff realization horizon mitigates target earnings management. Proportional ownership interest in the target firm and the stock-price rewards to undetected earnings management are incentives to manage earnings when target managers face a short horizon. I use two separate proxies: (1) performance adjusted discretionary accruals and (2) the probability of meeting or beating consensus analyst forecasts, to examine deals that use a mix of consideration types. I find that firms with higher proportional executive ownership claims (shares and options) exhibit higher levels of earnings management. However, higher levels of contingent consideration tend to mitigate the tendency to manage earnings.; I also document that acquirers anticipate target earnings management and, in their final valuation, partially discount target earnings that have been managed. However, this discounting does not appear to be complete as of the closing date of the acquisition. This potentially causes misvaluation, which is mitigated by contingent consideration.; Target earnings management and acquirers' failure to fully understand the extent of it contribute to target misvaluation. However, earnings management can be mitigated and its potential adverse impact on valuation can be reduced by the increased use of contingent consideration.