Does goodwill improve firm performance? Evidence from the MENA region

Abstract

As one of the main components of intangible assets appearing in the balance sheet, Goodwill has long been considered a as a driver of sustainable competitive business and corporate advantages. Yet, does goodwill really improve performance of firms in the MENA region? This paper documents the effect of goodwill on firm performance during the period between 2005 and 2015. The results of our analysis show that high level of goodwill has a positive impact on firm performance in large firms. Yet, at small firms, goodwill was not proved to improve performance. This can be explained by the fact that only good performing firms invest in goodwill while smaller firms simply struggle to generate tangible assets.