The influence of earnings management, covid-19 and controlling owners on goodwill impairment

Abstract

This study aims to examine the effects of firm-specific economic factors, proxies for earnings management, macroeconomic factors, and controlling ownership structure on goodwill impairment decisions for Norwegian listed firms. Precisely the effects of the mentioned factors on the decision of whether to recognize goodwill impairment losses or not, as well as the magnitude of the impairment. The approach in answering this is through a regression analysis using a binary-logistic regression and a multivariate tobit regression. The binary-logistic regression will display the variables that are statistically significant in predicting goodwill impairment decisions, while the tobit regression will display the variables that are significant in explaining the proportion of impaired goodwill. The finding supports previous literature on management use of accounting discretion to convey their private information regarding the performance of the firm rather than acting opportunistically. A major finding of the thesis is that government-controlled firms are more likely to impair goodwill than non-government-controlled firms. Furthermore, the covid-19 pandemic was not found to be associated with the impairment decision. The contribution of the thesis is that it fills the gap in research conducted on firms listed on the Norwegian stock exchange, on the effect of ownership on goodwill impairment and the effect of the covid-19 pandemic on the impairment decision.

This study aims to examine the effects of firm-specific economic factors, proxies for earnings management, macroeconomic factors, and controlling ownership structure on goodwill impairment decisions for Norwegian listed firms. Precisely the effects of the mentioned factors on the decision of whether to recognize goodwill impairment losses or not, as well as the magnitude of the impairment. The approach in answering this is through a regression analysis using a binary-logistic regression and a multivariate tobit regression. The binary-logistic regression will display the variables that are statistically significant in predicting goodwill impairment decisions, while the tobit regression will display the variables that are significant in explaining the proportion of impaired goodwill. The finding supports previous literature on management use of accounting discretion to convey their private information regarding the performance of the firm rather than acting opportunistically. A major finding of the thesis is that government-controlled firms are more likely to impair goodwill than non-government-controlled firms. Furthermore, the covid-19 pandemic was not found to be associated with the impairment decision. The contribution of the thesis is that it fills the gap in research conducted on firms listed on the Norwegian stock exchange, on the effect of ownership on goodwill impairment and the effect of the covid-19 pandemic on the impairment decision.