Dissertations, Theses, and Capstone Projects

Date of Degree


Document Type


Degree Name





Steven Lilien

Committee Members

Bharat Sarath

Robert Colson

Jianming Ye

Subject Categories



Banks, bargain purchase gain, fair value measurement, earnings management


This dissertation consists of two chapters that investigate earnings management through the recognition of bargain purchase gains in the banking industry and in other industries.

Chapter 1 In business acquisitions where the fair value of net assets acquired exceeds the consideration paid, acquiring firms recognize bargain purchase gains under ASC 805. The determination of the fair value of net assets at date of acquisition gives acquiring management considerable flexibility in judgments. In this chapter, I focus on bargain purchase acquisitions in the banking industry, and find that acquirer utilizes bargain purchase gains to avoid negative earnings and earnings decline. The reason for such transactions appears to be level-3 fair value estimates of FDIC loss share receivable acquired at date of acquisition.

Chapter 2 This chapter analyzes earnings management through bargain purchase gains in non-financial industries. The new accounting standard (FASB ASC 805) requires acquiring firms to estimate the fair value of net assets acquired and recognize the excess amount over purchase price as a bargain purchase gain, a component of current earnings. The flexibility in fair value measurement provides acquiring management with discretion to determine the amount of the bargain purchase gain. By investigating the association between bargain purchase gains and acquirers’ earning performance, I find that bargain purchase gains have consistently been used for earnings management purposes and that level-3 fair value estimates of intangible assets acquired are related to the intensity of this activity.

Included in

Accounting Commons