IDEAS home Printed from https://ideas.repec.org/a/eee/crpeac/v19y2008i8p1370-1383.html
   My bibliography  Save this article

Goodwill impairments and chief executive officer tenure

Author

Listed:
  • Masters-Stout, Brenda
  • Costigan, Michael L.
  • Lovata, Linda M.

Abstract

The purpose of this paper is to examine the tenure of the chief executive officers of publicly held companies and their corresponding goodwill impairment decisions. An opportunity for managers to manage earnings exists via the Financial Accounting Standards Board's (FASB) goodwill accounting rules. It is hypothesized that CEOs will recognize this impairment in the early years of their tenure because blame can be placed on prior management's acquisition decisions, expensing goodwill early will make future earnings look better, or an objective evaluation of the reporting unit increases impairments.

Suggested Citation

  • Masters-Stout, Brenda & Costigan, Michael L. & Lovata, Linda M., 2008. "Goodwill impairments and chief executive officer tenure," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 19(8), pages 1370-1383.
    • Handle: RePEc:eee:crpeac:v:19:y:2008:i:8:p:1370-1383
    DOI: 10.1016/j.cpa.2007.04.002
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S1045235407000640
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.cpa.2007.04.002?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Kets de Vries, Manfred, 2003. "The Retirement Syndrome:: The Psychology of Letting Go," European Management Journal, Elsevier, vol. 21(6), pages 707-716, December.
    2. Caroline Lambert & Samuel Sponem, 2005. "Corporate governance and profit manipulation: a French field study," Post-Print halshs-00170340, HAL.
    3. Pourciau, Susan, 1993. "Earnings management and nonroutine executive changes," Journal of Accounting and Economics, Elsevier, vol. 16(1-3), pages 317-336, April.
    4. Jayne Godfrey & Paul Mather & Alan Ramsay, 2003. "Earnings and Impression Management in Financial Reports: The Case of CEO Changes," Abacus, Accounting Foundation, University of Sydney, vol. 39(1), pages 95-123, February.
    5. Steven L. Henning & Wayne H. Shaw & Toby Stock, 2004. "The Amount and Timing of Goodwill Write-Offs and Revaluations: Evidence from U.S. and U.K. Firms," Review of Quantitative Finance and Accounting, Springer, vol. 23(2), pages 99-121, September.
    6. Peter Wells, 2002. "Earnings management surrounding CEO changes," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 42(2), pages 169-193, June.
    7. Strong, John S & Meyer, John R, 1987. "Asset Writedowns: Managerial Incentives and Security Returns," Journal of Finance, American Finance Association, vol. 42(3), pages 643-661, July.
    8. Danny Miller & Jamal Shamsie, 2001. "Learning across the life cycle: Experimentation and performance among the hollywood studio heads," Strategic Management Journal, Wiley Blackwell, vol. 22(8), pages 725-745, August.
    9. repec:dau:papers:123456789/1373 is not listed on IDEAS
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Wunhong Su & Chunlin Wang & Zhong‐qin Su, 2024. "Association between foreign background of executives and firm goodwill impairment risk," Bulletin of Economic Research, Wiley Blackwell, vol. 76(1), pages 223-250, January.
    2. Nour Malijebtou Hassine & Faouzi Jilani, 2017. "Earnings Management Behavior with Respect to Goodwill Impairment Losses under IAS 36: The French Case," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 7(2), pages 177-196, April.
    3. Begoña Giner & Francisca Pardo, 2015. "How Ethical are Managers’ Goodwill Impairment Decisions in Spanish-Listed Firms?," Journal of Business Ethics, Springer, vol. 132(1), pages 21-40, November.
    4. Silvia Ferramosca & Giulio Greco & Marco Allegrini, 2017. "External audit and goodwill write-off," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 21(4), pages 907-934, December.
    5. de Oliveira Leite, Rodrigo & dos Santos Mendes, Layla & de Lacerda Moreira, Rafael, 2020. "Profit status of microfinance institutions and incentives for earnings management," Research in International Business and Finance, Elsevier, vol. 54(C).
    6. 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.
    7. Jun Hyeok Choi & Saerona Kim & Ayoung Lee, 2019. "CEO Tenure, Corporate Social Performance, and Corporate Governance: A Korean Study," Sustainability, MDPI, vol. 12(1), pages 1-17, December.
    8. Jorge Pallarés Sanchidrián & Javier Pérez García & José A. Gonzalo-Angulo, 2021. "(IR) Relevance of goodwill impairment: the case of European banking (2005–2015)," Journal of Banking Regulation, Palgrave Macmillan, vol. 22(1), pages 24-38, March.
    9. Francesco Avallone & Claudia Gabbioneta & Paola Ramassa & Marco Sorrentino, 2015. "Why Do Firms Write Off Their Goodwill? A Comparison of Different Accounting Systems," FINANCIAL REPORTING, FrancoAngeli Editore, vol. 2015(1), pages 23-40.
    10. Alain Schatt & Leonidas Doukakis & Corinne Bessieux-Ollier & Elisabeth Walliser, 2016. "Do Goodwill Impairments by European Firms Provide Useful Information to Investors?," Accounting in Europe, Taylor & Francis Journals, vol. 13(3), pages 307-327, September.
    11. Iatridis, George Emmanuel & Pappas, Kostas & Walker, Martin, 2022. "Narrative disclosure quality and the timeliness of goodwill impairments," The British Accounting Review, Elsevier, vol. 54(2).
    12. 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.
    13. Durocher, Sylvain & Georgiou, Omiros, 2022. "Framing accounting for goodwill: Intractable controversies between users and standard setters," CRITICAL PERSPECTIVES ON ACCOUNTING, Elsevier, vol. 89(C).
    14. 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).
    15. Francesco Baldi & Lenos Trigeorgis, 2009. "Assessing the Value of Growth Option Synergies from Business Combinations and Testing for Goodwill Impairment: A Real Options Perspective," Journal of Applied Corporate Finance, Morgan Stanley, vol. 21(4), pages 115-124, September.
    16. Jorge Pallarés Sanchidrián & Javier Pérez García & José A. Gonzalo-Angulo, 2021. "Discretion in the application of the goodwill impairment test in European banks," Remef - Revista Mexicana de Economía y Finanzas Nueva Época REMEF (The Mexican Journal of Economics and Finance), Instituto Mexicano de Ejecutivos de Finanzas, IMEF, vol. 16(TNEA), pages 1-24, Septiembr.
    17. Inès Bouden & Luc Paugam & Olivier J. Ramond, 2011. "Les déterminants de la dépréciation du goodwill : proposition d'un cadre d'analyse," Post-Print hal-00646810, HAL.
    18. Plöckinger, Martin & Aschauer, Ewald & Hiebl, Martin R.W. & Rohatschek, Roman, 2016. "The influence of individual executives on corporate financial reporting: A review and outlook from the perspective of upper echelons theory," Journal of Accounting Literature, Elsevier, vol. 37(C), pages 55-75.
    19. Huikku, Jari & Mouritsen, Jan & Silvola, Hanna, 2017. "Relative reliability and the recognisable firm: Calculating goodwill impairment value," Accounting, Organizations and Society, Elsevier, vol. 56(C), pages 68-83.
    20. Killins, Robert & Ngo, Thanh & Wang, Hongxia, 2021. "Goodwill impairment and CEO overconfidence," Journal of Behavioral and Experimental Finance, Elsevier, vol. 29(C).
    21. 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.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Paul Mather & Alan Ramsay, 2006. "The Effects of Board Characteristics on Earnings Management around Australian CEO Changes," Accounting Research Journal, Emerald Group Publishing, vol. 19(2), pages 78-93, September.
    2. Suntharee Lhaopadchan, 2010. "Fair value accounting and intangible assets," Journal of Financial Regulation and Compliance, Emerald Group Publishing Limited, vol. 18(2), pages 120-130, May.
    3. Mark Wilson & Liang Wui Wang, 2010. "Earnings management following chief executive officer changes: the effect of contemporaneous chairperson and chief financial officer appointments," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 50(2), pages 447-480, June.
    4. Frerich Buchholz & Kerstin Lopatta & Karen Maas, 2020. "The Deliberate Engagement of Narcissistic CEOs in Earnings Management," Journal of Business Ethics, Springer, vol. 167(4), pages 663-686, December.
    5. Jong-Seo Choi & Young-Min Kwak & Chongwoo Choe, 2014. "Earnings Management Surrounding CEO Turnover: Evidence from Korea," Abacus, Accounting Foundation, University of Sydney, vol. 50(1), pages 25-55, March.
    6. Bornemann, Sven & Pfingsten, Andreas & Kick, Thomas & Schertler, Andrea, 2014. "Earnings baths by bank CEOs during turnovers," Discussion Papers 05/2014, Deutsche Bundesbank.
    7. Bornemann, Sven & Kick, Thomas & Pfingsten, Andreas & Schertler, Andrea, 2015. "Earnings baths by CEOs during turnovers: empirical evidence from German savings banks," Journal of Banking & Finance, Elsevier, vol. 53(C), pages 188-201.
    8. Ka Wai Choi & Xiaomeng Chen & Sue Wright & Hai Wu, 2014. "Analysts' Forecasts Following Forced CEO Changes," Abacus, Accounting Foundation, University of Sydney, vol. 50(2), pages 146-173, June.
    9. Paul Mather & Alan Ramsay, 2007. "Do Board Characteristics Influence Impression Management through Graph Selectivity Around CEO Changes?," Australian Accounting Review, CPA Australia, vol. 17(42), pages 84-95, July.
    10. Jun Hyeok Choi & Saerona Kim & Ayoung Lee, 2019. "CEO Tenure, Corporate Social Performance, and Corporate Governance: A Korean Study," Sustainability, MDPI, vol. 12(1), pages 1-17, December.
    11. Chung-Hua Shen & Chien-An Wang, 2019. "Do New Brooms Sweep Clean? Evidence that New CEOs Take a ‘Big Bath’ in the Banking Industry," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 18(1), pages 106-144, April.
    12. Yves Mard & Sylvain Marsat, 2009. "Earnings management surrounding CEO changes in France [La gestion du résultat comptable autour d'un changement de dirigeant en France]," Post-Print hal-02156582, HAL.
    13. Kevin Mayo & George Ball & Alex Mills, 2022. "CEO Tenure and Recall Risk Management in the Consumer Products Industry," Production and Operations Management, Production and Operations Management Society, vol. 31(2), pages 743-763, February.
    14. Andrews Owusu & Frank Kwabi & Ernest Ezeani & Ruth Owusu-Mensah, 2022. "CEO tenure and cost of debt," Review of Quantitative Finance and Accounting, Springer, vol. 59(2), pages 507-544, August.
    15. Abdul Majid, Jamaliah, 2015. "Reporting incentives, ownership concentration by the largest outside shareholder, and reported goodwill impairment losses," Journal of Contemporary Accounting and Economics, Elsevier, vol. 11(3), pages 199-214.
    16. Kind, Axel & Schläpfer, Yves, 2011. "Are forced CEO turnovers good or bad news?," Working papers 2011/10, Faculty of Business and Economics - University of Basel.
    17. Kabir, Humayun & Rahman, Asheq, 2016. "The role of corporate governance in accounting discretion under IFRS: Goodwill impairment in Australia," Journal of Contemporary Accounting and Economics, Elsevier, vol. 12(3), pages 290-308.
    18. James Lau & Philip Sinnadurai & Sue Wright, 2009. "Corporate governance and chief executive officer dismissal following poor performance: Australian evidence," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 49(1), pages 161-182, March.
    19. Conyon, Martin J. & Florou, Annita, 2006. "The pattern of investment surrounding CEO retirements: UK evidence," The British Accounting Review, Elsevier, vol. 38(3), pages 299-319.
    20. Doris M. Merkl-Davies & Niamh Brennan & Stuart McLeay, 2005. "A new methodology to measure impression management - A linguistic approach to reading difficulty," Open Access publications 10197/5786, Research Repository, University College Dublin.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:crpeac:v:19:y:2008:i:8:p:1370-1383. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: https://www.journals.elsevier.com/critical-perspectives-on-accounting/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.