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Goodwill impairment and CEO overconfidence

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  • Killins, Robert
  • Ngo, Thanh
  • Wang, Hongxia

Abstract

We examine how CEO overconfidence affects goodwill impairments after the adoption of SFAS 142 in US firms. Consistent with the nature of the cognitive position of overconfident CEOs, we find that both the likelihood and the magnitude of goodwill impairment recognition decrease when CEO overconfidence is elevated, providing evidence that SFAS142 is not applied consistently across firms. Overconfident CEOs are reluctant to book goodwill impairment losses. The results are robust with various model specifications, proxies for CEO overconfidence, and subsamples, suggesting that biased and less transparent financial reporting on goodwill impairment in firms with overconfident CEOs is an unintended consequence of SFAS142.

Suggested Citation

  • Killins, Robert & Ngo, Thanh & Wang, Hongxia, 2021. "Goodwill impairment and CEO overconfidence," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    • Handle: RePEc:eee:beexfi:v:29:y:2021:i:c:s2214635021000034
    DOI: 10.1016/j.jbef.2021.100459
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    2. Sumiyana Sumiyana & Ainun Na’im & Albertus H. L. Nugroho & Firdaus Kurniawan, 2023. "Multiple measurements of CEOs’ overconfidence and future earnings management: evidence from Asia-Pacific developing countries," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-11, December.
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    4. Lai, Shaojie & Liu, Shiang & Wang, Qing Sophie, 2023. "Déjà Vu: CEO overconfidence and bank mortgage lending in the post-financial crisis period," Journal of Behavioral and Experimental Finance, Elsevier, vol. 39(C).

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