Goodwill Impairment Charges and Analyst Forecast Properties

Posted: 17 Sep 2014 Last revised: 30 Dec 2016

See all articles by Lucy Huajing Chen

Lucy Huajing Chen

Villanova University

Jayanthi Krishnan

Temple University - Department of Accounting

Heibatollah Sami

Lehigh University

Date Written: September 16, 2014

Abstract

We examine the association between goodwill impairment charges and analysts’ forecast accuracy and dispersion. We compare firm-quarters that report periodic goodwill impairment charges during 2003-2007, and two control samples (matched on propensity scores and performance) of firm-quarters that do not report impairment charges. We find that analysts’ forecasts are less accurate and more dispersed for the impairment sample than for the control samples. The magnitude of impairment charges is also negatively associated with forecast accuracy and positively associated with forecast dispersion. However, two forms of monitoring, auditor industry specialization and institutional ownership, reduce the adverse effect of goodwill impairments on analyst forecast dispersion.

Keywords: Goodwill impairment; SFAS 142; Forecast accuracy; Forecast dispersion

JEL Classification: G14; M41; M44

Suggested Citation

Chen, Lucy Huajing and Krishnan, Jayanthi and Sami, Heibatollah, Goodwill Impairment Charges and Analyst Forecast Properties (September 16, 2014). Accounting Horizons, Forthcoming; Fox School of Business Research Paper No. 14-034. Available at SSRN: https://ssrn.com/abstract=2496945

Lucy Huajing Chen (Contact Author)

Villanova University ( email )

United States
610-519-6321 (Phone)

Jayanthi Krishnan

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States
215-204-3085 (Phone)

Heibatollah Sami

Lehigh University ( email )

Bethlehem, PA 18015
United States
610-758-3407 (Phone)

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