Mergers and acquisitions (M&A) are very significant corporate events for acquirers and the quality of accounting data play an important role in the decisions of M&A. Managers act on behalf of shareholders and seek out their self-interests. Managers have motives to manage reported earnings before M&A to enhance the stock price and to decrease the costs of a deal as a result to make high return for shareholders and for their selves. Moreover, manage earnings to avoid litigation from creditors and investors and to protect their selves from job dismissal. Consistent with this point of view, researchers investigates that whether acquirers manage earnings around M&A. This study investigates the involvement of M&A firms in earnings management (EM) activities for firms listed on Pakistan Stock Exchange (PSX). Though, limited research has been carried out on the topic of M&A in the context of Pakistan from the perspective of EM. Thus, this study attempts to bridge the gap by providing evidence of EM practice in M&A in the context of Pakistan. The sample of the study is taken from PSX of all listed non-financial M&A firms from the period 1996-2017. Data taken three years pre- M&A. For EM, the study used Discretionary Revenue Model (DRM). The results show that earnings are managed prior to M&A and significantly positive earnings during M&A.

Keywords: Mergers & Acquisitions, Earnings Management, Discretionary Revenue Model, Pakistan stock Exchange, Acquirers.