Purchase Price Allocations: Do they Matter?
AbstractStandards setters support that purchase price allocations (PPAs) enhance financial statement decision-usefulness whereas academics and practitioners challenge this statement. We test the consequences of the quality of PPAs, subsequent to business combinations, on change in market expectations. Using the concept of abnormal goodwill - as a proxy for PPAs' quality - we test the association between PPAs' quality and analyst forecasts revisions, change in forecasts dispersion, and analysts' accuracy of 200 major U.S. business combinations. We do not find evidence that PPAs' quality have material impact on change in market expectations, suggesting that market participants fail to fully integrate information content of PPAs. Consistently, we provide evidence that PPAs' quality enables to generate a profitable investment strategy as cumulated abnormal returns can be systematically generated based on abnormal goodwill recognized in PPAs.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HAL in its series Post-Print with number halshs-00671611.
Date of creation: 09 May 2012
Date of revision:
Publication status: Published - Presented, European Accounting Association (EAA) 2012 annual meeting, 2012, Ljubljana, Slovenia
Note: View the original document on HAL open archive server: http://halshs.archives-ouvertes.fr/halshs-00671611
Contact details of provider:
Web page: http://hal.archives-ouvertes.fr/
Purchase Price Allocation; Market Expectations; Abnormal Goodwill; Business Combination;
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-28 (All new papers)
You can help add them by filling out this form.
reading list or among the top items on IDEAS.Access and download statisticsgeneral information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD).
If references are entirely missing, you can add them using this form.