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Market value, book value and goodwill.

Ibrahim, Muhd Kamil. (1999) Market value, book value and goodwill. PhD thesis, Prifysgol Bangor University.

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Abstract

This thesis examines the value relevance of goodwill that has been eliminated through reserves in the year of acquisition. Specifically, it investigates the association beiween goodwill reserve write-off and the value placed on the firm by the stock market. In so doing, the thesis describes the relationship between the implied value of purchased goodwill and that of other assets, and we seek to explain the underlying paffern of the amortisation of goodwill over time. The empirical method uses cross-sectional equity valuation models for the period 1994- 6. Based on the modified balance sheet identity, the equity valuation model parameterises purchased goodwill and other assets separately, and a more meaningful interpretation is given of the intercept term than in previous studies relating to purchased goodwill. The results confirm that the market incorporates information on the goodwill reserve write-off in the valuation of a firm, and the results also show that the market: book ratio is similar to tangible assets but its behaviour suggests a relatively higher amortisation rate. Although the present study provides evidence supporting the requirement in FRS 10 (Goodwill and Intangible Assets) to capitalise purchased goodwill, the findings also show that the incremental value of capitalised goodwill declines far more quickly than FRS1O suggests, thus placing particular importance on the impairment test required by FRS 10.

Item Type: Thesis (PhD)
Uncontrolled Keywords: Finance Taxation International trade Management
Subjects: Degree Thesis
Departments: College of Business, Law, Education and Social Sciences > Bangor Business School
Degree Thesis
Date Deposited: 14 May 2015 04:09
Last Modified: 31 Aug 2016 09:45
URI: http://e.bangor.ac.uk/id/eprint/4072
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