CEO bonus and fair value accounting : evidence from us business combination

الملخص EN

This study investigates the role executive compensation structure plays in post-acquisition fair value measurement of goodwill at Purchase Price Allocation (PPA).

It examines the relationship of CEO earning based (bonus) with the amount recognized as goodwill after mergers and acquisitions.

Also, the study investigates the effect of CEO characteristics such as gender, age and tenure on goodwill recognition.

After SFAS 142 is applied in 2002, goodwill required to be impaired based on fair value estimates instead of being amortized like other identifiable intangible assets.

This may lead CEOs to report more goodwill to avoid depreciation cost and thus increase reported income and consequently their bonus.

Using a sample of 110 public U.

S business combinations completed in the service sector between 2002 and 2015; first, the researcher finds that the relationship between CEO bonus and the amounts recognized as goodwill is not linear but correlates only if he/she has longer tenure.

Also, results indicate negative relationship between higher representation of CEO male and goodwill.

Overall, findings indicate that executive compensation structure affects the fair value accounting for acquired assets and liabilities after a business combination.

This study is the first to test for the impact of CEO bonus on fair value measurement of goodwill in U.

S context specifically in the service sector industry and also, shed the light on CEO tenure interaction effect on goodwill recognition