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An Empirical Investigation of Goodwill in Austria: Evidence on Management Change and Cost of Capital

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  • George Emmanuel Iatridis
  • Daniel Senftlechner

Abstract

type="main"> This study assesses whether new chief executive officers (CEOs) or CEOs in their early tenure carry out goodwill impairments more intensively than senior CEOs. Further, it investigates the relationship between cost of capital and goodwill, as well as whether companies that report goodwill and are audited by a Big 4 auditor display lower cost of capital. The findings show that a change in CEO does not significantly lead to higher goodwill impairments. Using Austria as a case study, the study finds that, in the years of their early tenure, CEOs in Austria generally do not adopt goodwill impairment-related opportunistic behaviours. This study indicates that companies that have carried out goodwill impairment tend to display higher cost of capital, reflecting the potential uncertainty about their future prospects and cash generating ability. The findings show that companies that report goodwill and are audited by a Big 4 auditor tend to display lower cost of capital.

Suggested Citation

  • George Emmanuel Iatridis & Daniel Senftlechner, 2014. "An Empirical Investigation of Goodwill in Austria: Evidence on Management Change and Cost of Capital," Australian Accounting Review, CPA Australia, vol. 24(2), pages 171-181, June.
    • Handle: RePEc:bla:ausact:v:24:y:2014:i:2:p:171-181
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    File URL: http://hdl.handle.net/10.1111/auar.12014
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    3. Jonas Oliveira & Graça Azevedo & Bertina Oliveira, 2018. "Impairment Losses: The Impact of First‐time Adoption of the Accounting Standardisation System in Portugal," Australian Accounting Review, CPA Australia, vol. 28(4), pages 556-576, December.
    4. Runesson, Emmeli & Samani, Niuosha, 2023. "Goodwill or “No-will”: Hubris in the tone at the top," Journal of Contemporary Accounting and Economics, Elsevier, vol. 19(1).
    5. Carla Carvalho & Ana Maria Rodrigues & Carlos Ferreira, 2016. "The Recognition of Goodwill and Other Intangible Assets in Business Combinations – The Portuguese Case," Australian Accounting Review, CPA Australia, vol. 26(1), pages 4-20, March.
    6. Jani Saastamoinen & Hannu Ojala & Kati Pajunen & Pontus Troberg, 2018. "Analyst Characteristics and the Level of Critical Perception of Goodwill Accounting," Australian Accounting Review, CPA Australia, vol. 28(4), pages 538-555, December.
    7. Teplova, T. & Sokolova, T. & Teplov, A., 2017. "Intellectual Capital of Russian Companies as a Driver of Reducing the Cost of Debt," Journal of the New Economic Association, New Economic Association, vol. 36(4), pages 107-134.
    8. d'Arcy, Anne & Tarca, Ann, 2018. "Reviewing IFRS Goodwill Accounting Research: Implementation Effects and Cross-Country Differences," The International Journal of Accounting, Elsevier, vol. 53(3), pages 203-226.
    9. Sung Hwan Jung, 2016. "Audit Effort and Market-perceived Risk: Evidence from South Korea," Australian Accounting Review, CPA Australia, vol. 26(3), pages 255-270, September.

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