 What drives the allocation of the purchase price to goodwill?Martin Bugeja and Anna Loyeung Journal of Contemporary Accounting and Economics, 2015, vol. 11, issue 3, 245-261 Abstract: This study examines the proportion of the purchase price allocated to goodwill after the successful acquisition of a publicly listed firm. Using hand collected data we document that 42% of acquirers record a nil amount for goodwill. We find that the amount allocated to goodwill is generally unrelated to target firm economic characteristics. In contrast, consistent with managerial opportunism, we find a positive association between the use of accounting based bonus plans to compensate acquiring firm CEOs and the amount allocated to goodwill. The amount allocated to goodwill also increases after Australia adopted IFRS which no longer required goodwill to be systematically amortised. Other variables associated with goodwill recognition include the acquiring firm's leverage, the takeover premium, whether the target and the bidder operate in the same industry, existing goodwill in the target firm before the takeover announcement and the method of payment used in the acquisition. Keywords: Purchase price allocation; Goodwill; IFRS; Opportunism (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:11:y:2015:i:3:p:245-261 DOI: 10.1016/j.jcae.2015.10.002 Access Statistics for this article Journal of Contemporary Accounting and Economics is currently edited by Agnes C.S. Cheng, P. Clarkson, F.A. Gul, Zoltan Matolcsy, Dan Simunic and Ben Srinidhi More articles in Journal of Contemporary Accounting and Economics from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.