University of Hertfordshire


  • M. Hamberg
  • J. Novak
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Original languageEnglish
PublisherUniversity of Hertfordshire
Publication statusPublished - 2006

Publication series

NameBusiness School Working Papers
PublisherUniversity of Hertfordshire
VolumeUHBS 2006-4


We investigate how the adoption of IFRS 3, business combinations, affected reported goodwill and whether the change was relevant for stock market valuation of companies. We use data for all companies listed at the main Swedish stock exchanges. We find some evidence suggesting that aggregated goodwill impairment charges in 2005 are lower than aggregated goodwill amortizations in 2004. Hence, goodwill seems to be more persistent than implied in the amortization plans used prior IFRS. In addition, our results indicate that the information on higher goodwill persistence had not been impounded in stock prices prior to the IFRS 3 adoption. We document some evidence of positive returns earned on a zero-investment trading strategy that buys stock of goodwill- and intangible-asset-intensive companies whose expected earnings are favourably affected by higher persistence of goodwill and short-sell stocks with low goodwill and intangible asset. These results may indicate that the increased relevance of the reported goodwill measure after the adoption of IFRS 3 was relevant for stock market valuation of companies. However, the change across portfolios was not statistically significant.

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