Josefine Boehm, Henning Zülch

• With the introduction of IFRS 3 Business Combinations, the International Accounting Standards Board aligned the treatment of negative goodwill as a day-one profit to the reason of lucky buys that are officially addressed to as “bargain purchases”. However, among international standard setters and practitioners the doubt prevails that negative goodwill merely represents an accounting phenomenon. We aim to provide a new perspective to the discussion by testing whether upon initial announcement iestors perceive negative goodwill acquisitions as more value creating than a set of comparable transactions. Based on a sample of negative goodwill acquisitions by Germany’s yearly 160 largest listed firms from 2005 to 2014 and their matched counterparts, we indeed find a positive differential reaction in average cumulative (abnormal) returns for a three-day event window. The difference particularly holds when excluding adverse market conditions as a by the negative goodwill acquirer disclosed reason for the gain. Therefore, our evidence suggests that iestors might associate the occurrence of negative goodwill to actual lucky buys.