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Accounting for business combinations: Do purchase price allocations matter?

hal.structure.identifierESSEC BUSINESS SCHOOL [ESSEC-CENTRE DE RECHERCHE]
dc.contributor.authorPaugam, Luc*
hal.structure.identifierInstitut de Recherche en Gestion [IRG]
dc.contributor.authorAstolfi, Pierre
HAL ID: 3502
ORCID: 0000-0002-9282-700X		*
hal.structure.identifierDauphine Recherches en Management [DRM]
dc.contributor.authorRamond, Olivier*
dc.date.accessioned2015-01-20T17:53:41Z
dc.date.available2015-01-20T17:53:41Z
dc.date.issued2015
dc.identifier.issn0278-4254
dc.identifier.urihttps://basepub.dauphine.fr/handle/123456789/14572
dc.language.isoenen
dc.subjectPurchase Price Allocation (PPA)en
dc.subjectMarket Expectationsen
dc.subjectAbnormal Goodwillen
dc.subjectBusiness Combinationen
dc.subject.ddc658.1en
dc.subject.classificationjelG.G1.G14en
dc.subject.classificationjelG.G1.G18en
dc.subject.classificationjelM.M4.M41en
dc.titleAccounting for business combinations: Do purchase price allocations matter?en
dc.typeArticle accepté pour publication ou publié
dc.description.abstractenThis study investigates the informativeness of purchase price allocations (PPAs) that involve fair value estimation of acquired assets and liabilities after a business combination. Using a model capturing the amount of goodwill expected after the initial announcement of an acquisition, we examine how allocation of abnormal levels of purchase price to goodwill (Abnormal Goodwill) affects stock price reaction surrounding the first disclosure of the PPA in SEC filings, and the acquirer’s future performance. From a sample of 308 economically significant U.S. business combinations completed between 2002 and 2011, we document the following results: (1) Abnormal Goodwill is negatively associated with cumulative abnormal returns surrounding the first disclosure of the PPA, (2) there is a stronger negative reaction to Abnormal Goodwill for acquisitions that were already negatively received by market participants when initially announced than for acquisitions that were initially received positively, (3) the frequency and magnitude of goodwill impairment during the three years following completion of the acquisition increases as Abnormal Goodwill increases, and (4) future performance decreases as Abnormal Goodwill increases. Overall, our findings indicate that Abnormal Goodwill is informative regarding the quality of acquisitions. This study contributes to the debate on the usefulness of PPA.en
dc.relation.isversionofjnlnameJournal of Accounting and Public Policy
dc.relation.isversionofjnlvol34en
dc.relation.isversionofjnlissue4en
dc.relation.isversionofjnldate2015
dc.relation.isversionofjnlpages362–391en
dc.relation.isversionofdoi10.1016/j.jaccpubpol.2015.04.003
dc.relation.isversionofjnlpublisherElsevieren
dc.subject.ddclabelOrganisation et finances d'entrepriseen
dc.description.halcandidateoui
dc.description.readershiprecherche
dc.description.audienceInternational
dc.relation.Isversionofjnlpeerreviewedoui
hal.identifierhal-01277376*
hal.version1*
hal.update.actionupdateMetadata*
hal.update.actionupdateFiles*
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