Negative goodwill and postmerger operating performance: evidence from Japan
ISSN: 1321-7348
Article publication date: 5 July 2022
Issue publication date: 20 October 2022
Abstract
Purpose
This study examines the relation between negative goodwill (NGW) and operating performance after mergers and acquisitions (M&A).
Design/methodology/approach
This is a comparative analysis of post-M&A operating performance for 228 transactions involving listed Japanese firms that generated negative or positive goodwill.
Findings
First, post-M&A operating performance is lower when the transaction generates NGW. Second, the negative relation between NGW and post-M&A performance is stronger when managers have incentives for earnings management and when target firms perform poorly before M&A. Third, changes in the accounting treatment of NGW alter the relative importance of earnings management incentives and target firms' poor pre-M&A performance.
Originality/value
Prior studies attribute the negative relation between NGW and post-M&A performance solely to acquiring firms' managers' earnings management incentives. The current study finds that the target firm's poor pre-M&A performance is also associated with the relation between NGW and post-M&A performance.
Keywords
Acknowledgements
The author would like to thank the journal's editor and anonymous reviewer for their helpful and valuable comments. He also acknowledges the financial support received from the Japan Society for the Promotion of Science (JSPS KAKENHI Grant Numbers 19J10933 and 21K20148).
Citation
Amano, Y. (2022), "Negative goodwill and postmerger operating performance: evidence from Japan", Asian Review of Accounting, Vol. 30 No. 4, pp. 381-397. https://doi.org/10.1108/ARA-02-2022-0033
Publisher
:Emerald Publishing Limited
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