Purchased Goodwill and Financial Performance of Banks in Nigeria
Journal Title: IOSR journal of Business and Management - Year 2018, Vol 20, Issue 10
Abstract
This study investigates the effect of purchased goodwill on return on assets, return on equity and earnings per share of banks in Nigeria. Listed banks were classified into goodwill sample and non-goodwill sample, depending on whether or not the banks had purchased goodwill in their financial statements. Data from annual reports of the goodwill sample from 2012 to 2016 were collated and analysed; and firm performance data from the two samples were compared to determine whether profitability in any sample was significantly higher than the other sample. Results from regression analysis of data from the goodwill sample showed that goodwill was significantly but negatively related to returns of asset, returns on equity, and earnings per share, suggesting that acquisitions in the Nigerian banking sector may have been detrimental to profitability. Comparison of the two samples showed that profitability was not significantly higher in any of the samples. Accordingly, it is recommended that corporate boards should thoroughly examine managerial motives for acquisitions, and ensure that any goodwill booked from business combinations should faithfully represent future economic gains of other assets acquired from the target company.
Authors and Affiliations
Gospel J. Chukwu, Drisu Salifu
Keywords
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- EP ID EP413024
- DOI 10.9790/487X-2010025258.
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