Managerial Ability, Financial Performance and Goodwill Impairment: A Moderated Mediation Analysis
29 Pages Posted: 5 Jun 2020
Date Written: May 11, 2020
This paper examines whether and how managerial ability affects the likelihood of goodwill impairment of Chinese publicly listed companies over the period 2007-2017. We document a negative relationship between goodwill impairment and managerial ability, and uncover the mediation effect of corporate financial performance. Moreover, we find that the mediation effect is moderated by firms’ earnings smoothing motivation and state ownership. The results suggest that when a company has the motivation to smooth earnings or is owned by the government, higher managerial ability of the company does not necessarily reduce the likelihood of goodwill impairment. The findings have important implications for investors and regulators.
Keywords: Goodwill impairment, Managerial ability, Financial performance, Moderated mediation
JEL Classification: G32, G34, M41
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