Goodwill Impairment: The Effects of Public Enforcement and Monitoring by Institutional Investors

Forthcoming: The Accounting Review

63 Pages Posted: 28 Dec 2017

See all articles by Martin Glaum

Martin Glaum

WHU - Otto Beisheim School of Management

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School

Sven Wyrwa

International School of Management ISM (Frankfurt)

Date Written: December 23, 2017

Abstract

This study investigates the determinants of goodwill impairment decisions by firms applying IFRS based on a comprehensive sample of stock-listed firms from 21 countries. Multivariate logistical regression findings indicate that goodwill impairment incidence is negatively associated with economic performance, but also related to proxies for managerial and firm-level incentives. In addition, whereas goodwill impairment tends to be timely for firms in high enforcement countries, firms in low enforcement countries tend to be less responsive to declines in the economic value of goodwill; CEO compensation concerns affect the impairment decision for firms in low enforcement; and CEO reputation concerns and management preference for smooth earnings influence goodwill impairment decisions in high as well as low enforcement countries. We also find that private monitoring through institutional investors substitute for public enforcement in the context of goodwill impairment when a country’s enforcement regime is relatively weak.

Keywords: IFRS, Goodwill, Impairment Testing, Timeliness, Enforcement, Managerial Discretion, Institutional Investors

JEL Classification: M4, M40, M41, M42, K2, K42, G3, G34

Suggested Citation

Glaum, Martin and Landsman, Wayne R. and Wyrwa, Sven, Goodwill Impairment: The Effects of Public Enforcement and Monitoring by Institutional Investors (December 23, 2017). Forthcoming: The Accounting Review, Available at SSRN: https://ssrn.com/abstract=3092658

Martin Glaum (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
D-56179 Vallendar
Germany
+49 261 - 6509-315 (Phone)

Wayne R. Landsman

University of North Carolina Kenan-Flagler Business School ( email )

McColl Building
Chapel Hill, NC 27599-3490
United States
919-962-3221 (Phone)
919-962-4727 (Fax)

Sven Wyrwa

International School of Management ISM (Frankfurt) ( email )

Mörfelder Landstraße 55
Frankfurt am Main, 60598
Germany

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