What drives the allocation of the purchase price to goodwill?

Bugeja, M; Loyeung, A

What drives the allocation of the purchase price to goodwill?

Bugeja, M

Loyeung, A

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Publication Type:: Journal Article
Citation:: Journal of Contemporary Accounting and Economics, 2015, 11 (3), pp. 245 - 261
Issue Date:: 2015-12-01

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Field	Value	Language
dc.contributor.author	Bugeja, M https://orcid.org/0000-0002-1941-5092	en_US
dc.contributor.author	Loyeung, A https://orcid.org/0000-0003-2049-0492	en_US
dc.date.issued	2015-12-01	en_US
dc.identifier.citation	Journal of Contemporary Accounting and Economics, 2015, 11 (3), pp. 245 - 261	en_US
dc.identifier.issn	1815-5669	en_US
dc.identifier.uri	http://hdl.handle.net/10453/124823
dc.description.abstract	© 2015 Elsevier Ltd. 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.	en_US
dc.relation.ispartof	Journal of Contemporary Accounting and Economics	en_US
dc.relation.isbasedon	10.1016/j.jcae.2015.10.002	en_US
dc.title	What drives the allocation of the purchase price to goodwill?	en_US
dc.type	Journal Article
utslib.citation.volume	3	en_US
utslib.citation.volume	11	en_US
utslib.for	1501 Accounting, Auditing and Accountability	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	1502 Banking, Finance and Investment	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
utslib.copyright.status	open_access
pubs.issue	3	en_US
pubs.publication-status	Published	en_US
pubs.volume	11	en_US

Abstract:

© 2015 Elsevier Ltd. 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.

Please use this identifier to cite or link to this item:

http://hdl.handle.net/10453/124823