Thesis (Ph. D.)--Massachusetts Institute of Technology, Sloan School of Management, 2011.Cataloged from PDF version of thesis.Includes bibliographical references (p. 37-41).I examine the negotiation of accounting rules in the purchase price adjustment clause of corporate acquisition agreements. Purchase price adjustments make the deal value contingent on the target's closing working capital or net worth. Some purchase price adjustments use "rigid" accounting and specify which measurement rules will be used to prepare the closing-date balance sheet. Many more use "flexible" accounting and require only GAAP compliance. I provide evidence that hidden action and adverse selection problems determine whether the buyer and seller use rigid or flexible accounting. I also provide evidence that this choice is associated with other features of the contract related to purchase price adjustment flexibility and to the prospect of hold-up. Estimates of the effect of rigid accounting on finalized purchase price adjustments are consistent with implications of the adverse selection and hold-up problems.by Derek Christopher Johnson.Ph.D.