This paper examines the relation between earnings management preceding a stock-for-stock merger announcement and the market performance. Because the exchange ratio is inversely related to acquiring firms’ stock price, acquiring firms have an incentive to attempt to manage earnings upward, and to increase their share price pre-merger. If acquiring firms manage earnings prior to the merger announcement, the effect is expected to be a significant determinant of the short-term or the long-term performance of stock-for-stock mergers. The result suggests that acquiring firms manage earnings upward in the period prior to a stock-forstock merger announcement. The study also suggests that the effect of the earnings management seems to be reflected in the reversal of earnings, and the post-merger long-term underperformance.