Manager’s misinterpretation of goodwill impairments: Evidence from German listed companies
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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in: International Journal of Accounting, Auditing and Performance Evaluation, Jahrgang 15, Nr. 2, 2019, S. 168-190.
Publikation: Beiträge in Zeitschriften › Zeitschriftenaufsätze › Forschung › begutachtet
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TY - JOUR
T1 - Manager’s misinterpretation of goodwill impairments
T2 - Evidence from German listed companies
AU - Lazar, Laurent
PY - 2019
Y1 - 2019
N2 - This study investigates the reported goodwill of German listed companies between 2009 and 2014 and focuses on opportunistic behaviour by managers applying the impairment only approach (IOA) in accordance with IAS 36. Contributing to the literature on goodwill accounting, this investigation examines changes of CEOs and companies’ financial situation, showing that the profit trend is an indicator of goodwill impairments. The results also indicate that new CEOs show a tendency for big bath accounting when taking office and therefore write off more goodwill than incumbent CEOs. Moreover, managers are more likely to impair goodwill when current earnings are negative, especially after decreases in earnings above the annual average. On the other hand, managers tend to avoid goodwill impairments when earnings decrease significantly but still remain positive.
AB - This study investigates the reported goodwill of German listed companies between 2009 and 2014 and focuses on opportunistic behaviour by managers applying the impairment only approach (IOA) in accordance with IAS 36. Contributing to the literature on goodwill accounting, this investigation examines changes of CEOs and companies’ financial situation, showing that the profit trend is an indicator of goodwill impairments. The results also indicate that new CEOs show a tendency for big bath accounting when taking office and therefore write off more goodwill than incumbent CEOs. Moreover, managers are more likely to impair goodwill when current earnings are negative, especially after decreases in earnings above the annual average. On the other hand, managers tend to avoid goodwill impairments when earnings decrease significantly but still remain positive.
KW - Big bath accounting
KW - Earnings management
KW - Goodwill
KW - IAS 36
KW - Impairment only approach
KW - Income smoothing
KW - IOA
KW - Management studies
UR - http://www.scopus.com/inward/record.url?scp=85065601337&partnerID=8YFLogxK
U2 - 10.1504/IJAAPE.2019.099144
DO - 10.1504/IJAAPE.2019.099144
M3 - Journal articles
AN - SCOPUS:85065601337
VL - 15
SP - 168
EP - 190
JO - International Journal of Accounting, Auditing and Performance Evaluation
JF - International Journal of Accounting, Auditing and Performance Evaluation
SN - 1740-8008
IS - 2
ER -