Goodwill impairments and chief executive officer tenure

Masters-Stout, Brenda; Costigan, Michael L.; Lovata, Linda M.

doi:10.1016/j.cpa.2007.04.002

Cited by 55 publications

(50 citation statements)

References 18 publications

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“…This result agrees with others studies which investigate goodwill impairment during transition period (Riedl, 2004;Zang, 2008;Lapointe-Antunes et al, 2008) and following this era (Guler, 2006;Masters-Stout et al, 2008;Stumpell, 2012;Al Dabbous et al, 2015).…”

Section: International Journal Of Accounting and Financial Reportingsupporting

confidence: 82%

“…Earlier literature reported a positive association between the tenure of CEO and earnings management behaviors, as measured by discretionary accruals (Wells, 2002;Goodfrey, 2003) and assets write-offs (Strong & Meyer, 1987;Elliott & Show, 1988). More recently, researches have investigated the relation between CEO change and goodwill write-offs, in the transition period (Beatty & Weber, 2006;Zang, 2008;Lapointe-Antunes et al, 2008) and in the post-adoption period (Guler, 2006;Masters-Stout et al, 2008;Stumpell, 2012;Ramanna & Watts, 2012;Al Dabbous et al, 2015) and have proved that new managers tend to use the discretion afforded by the goodwill impairment process under IAS 36, in order to reduce earnings. Following prior researches, we predict a positive association between CEOs change and goodwill write-offs.…”

Section: Change In Senior Managementmentioning

confidence: 99%

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Determinants of Goodwill Impairment Losses under IAS 36: The French Case

Hassine

Jilani

2017

ijafr

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The present paper investigates the determinants of goodwill impairment losses under IAS 36. More specifically, this study examines the impact of earnings management, corporate governance and financial crisis on goodwill impairment losses reported by French firms following the adoption of IAS 36 on purchased goodwill. Based on a sample of 730 observations from 107 groups of companies that belong to the SBF 250 over the period 2006-2012, the findings of this research confirm largely our predictions. Indeed, main results show that managers impair goodwill to meet earnings management motives linked to CEO change, earnings smoothing, big bath accounting and financial crisis. Moreover, they reveal that French firms impair goodwill to respond to debt renegotiation hypothesis. In addition, the findings demonstrate that French firms audited by a Big Four auditor record lower goodwill impairment losses. Thus, they highlight the role of audit quality to constrain managerial opportunism associated to goodwill impairment. This study illuminates the accounting standard-setters in understanding the determinants of goodwill impairment losses in France under IAS 36. Therefore, it contributes to the international actual debate on goodwill and to the international accounting literature.

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Section: International Journal Of Accounting and Financial Reportingsupporting

confidence: 82%

Section: Change In Senior Managementmentioning

confidence: 99%

Determinants of Goodwill Impairment Losses under IAS 36: The French Case

Hassine

Jilani

2017

ijafr

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“…Prior studies argue that existing top managers may not have reported goodwill impairment losses (by reporting zero goodwill impairment) when their firms' booktomarket ratio was above one because of concern for their personal reputations (Beatty and Weber 2006, MastersStout et al 2008, Ramanna and Watts 2012. The top managers who were directly involved in the creation of goodwill through business combinations may be reluctant to writeoff the goodwill as doing so would imply that they were unable to realize the expected synergies from the business combi nations (LapointeAntunes et al 2008, MastersStout et al 2008.…”

Section: Ceo Reputationmentioning

confidence: 99%

“…The top managers who were directly involved in the creation of goodwill through business combinations may be reluctant to writeoff the goodwill as doing so would imply that they were unable to realize the expected synergies from the business combi nations (LapointeAntunes et al 2008, MastersStout et al 2008.…”

Section: Ceo Reputationmentioning

confidence: 99%

Audit Committee Independence and a Contracting Perspective on Goodwill Impairment: Singaporean Evidence

Majid

2017

Business: Theory and Practice

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Abstract. This study examines factors influencing and constraining the decision to recognize zero goodwill impairment in a sample of 52 Singaporean listed firms from 2010-2012. Using binary logistic regressions, the results reveal that firms that are approaching violation of their debt covenants have a higher likelihood of exercising the recognition choice, while a higher proportion of audit committee independence constrains this choice. The policy implication of this study is that to improve the quality of the financial statements, the relevant authorities need to monitor firms' reporting incentives closely. This study contributes to the literature on IFRS by providing evidence that supports the applicability of the debt hypothesis in explaining the decision of Singaporean listed firms to recognize zero goodwill impairment.

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“…The theoretical review of opportunistic discretionary choice research in the case of goodwill impairment provides evidence that the most common statistically significant incentives (reasons) for impairment of goodwill are: management tenure (Beatty & Weber, 2006;Ramanna & Watts, 2011) or changes of management (Guler, 2006;Masters-Stout, Costigan & Lovata, 2008;Zang, 2008), management's compensation system (Guler, 2006;Beatty & Weber, 2006;Ramanna & Watts, 2011), restrictive debt covenants (Beatty & Weber, 2006;Ramanna & Watts, 2011) or proportion of debt financing (Zang, 2008;Godfrey & Koh, 2009), and unexpectedly high (Segal, 2003;Van de Poel, Maijoor & Vanstelen, 2009) or unexpectedly low income (Guler, 2006;Cowan, Dilla & Jeffrey, 2006;Van de Poel et al, 2009;Maijoor & Vanstraelen, 2006). Incentives for the opportunistic impairment of goodwill are supported by the rules in accounting standards that allow opportunism.…”

Section: Theoretical Backgroundmentioning

confidence: 99%