Get 20M+ Full-Text Papers For Less Than $1.50/day. Start a 14-Day Trial for You or Your Team.

Learn More →

Determinants of goodwill impairment disclosure: the role of audit quality and analysts following

Determinants of goodwill impairment disclosure: the role of audit quality and analysts following The authors investigate the effect of audit quality and analysts' coverage on firms' compliance concerning goodwill impairment testing and disclosure requirements with the Indian Accounting Standard (Ind AS) over the period of 2017–2020.Design/methodology/approachThe authors conduct univariate analysis and employ pooled ordinary least square (POLS) and Fama–MacBeth (FMB) regression techniques for empirical testing.FindingsThe authors report a substantially higher disclosure score (DS) for firms with superior audit quality and for firms with incidence of analysts' coverage. Moreover, the authors show a positive impact of audit quality on the firm's degree of disclosure. This signifies better compliance by the clients of Big-4 audit firms in the enforcement of standard's mandates. Besides, the results on analysts' coverage indicate that the increasing number of analysts discipline managers in terms of appropriate compliance with disclosure requirements, hence favours the monitoring effect hypothesis for Indian firms. The results are robust to the alternate measures of key regressors, set of firm controls and alternate estimation technique.Originality/valueThe study adds to the knowledge concerning the economic consequences of mandatory disclosures and is possibly the first to investigate compliance related to goodwill impairment disclosure regime under the new Ind AS. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Managerial Finance Emerald Publishing

Determinants of goodwill impairment disclosure: the role of audit quality and analysts following

Ranga, Abhishek; Pathak, Rajesh
Managerial Finance , Volume 49 (1): 22 – Jan 2, 2023
Download PDF
22 pages

Loading next page...
 
/lp/emerald-publishing/determinants-of-goodwill-impairment-disclosure-the-role-of-audit-YHZuQR3OmP
Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
0307-4358
DOI
10.1108/mf-03-2022-0115
Publisher site
See Article on Publisher Site

Abstract

The authors investigate the effect of audit quality and analysts' coverage on firms' compliance concerning goodwill impairment testing and disclosure requirements with the Indian Accounting Standard (Ind AS) over the period of 2017–2020.Design/methodology/approachThe authors conduct univariate analysis and employ pooled ordinary least square (POLS) and Fama–MacBeth (FMB) regression techniques for empirical testing.FindingsThe authors report a substantially higher disclosure score (DS) for firms with superior audit quality and for firms with incidence of analysts' coverage. Moreover, the authors show a positive impact of audit quality on the firm's degree of disclosure. This signifies better compliance by the clients of Big-4 audit firms in the enforcement of standard's mandates. Besides, the results on analysts' coverage indicate that the increasing number of analysts discipline managers in terms of appropriate compliance with disclosure requirements, hence favours the monitoring effect hypothesis for Indian firms. The results are robust to the alternate measures of key regressors, set of firm controls and alternate estimation technique.Originality/valueThe study adds to the knowledge concerning the economic consequences of mandatory disclosures and is possibly the first to investigate compliance related to goodwill impairment disclosure regime under the new Ind AS.

Journal

Managerial Finance – Emerald Publishing

Published: Jan 2, 2023

Keywords: Disclosure; Compliance; Goodwill; Impairment; Audit quality; Analysts' coverage

References

  • Disclosure compliance with national accounting standards by listed companies in South Asia
    Ali, M.J.; Ahmed, K.; Henry, D.
  • Mandated disclosures under IAS 36 Impairment of Assets and IAS 38 Intangible Assets: value relevance and impact on analysts' forecasts
    André, P.; Dionysiou, D.; Tsalavoutas, I.
  • Effect of audit quality and accounting and finance backgrounds of audit committee members on firms' compliance with IFRS for goodwill impairment testing
    Bepari, M.K.; Mollik, A.T.
  • Firms' compliance with the disclosure requirements of IFRS for goodwill impairment testing: effect of the global financial crisis and other firm characteristics
    Bepari, M.K.; Rahman, S.F.; Mollik, A.T.
  • The determinants and consequences of heterogeneous IFRS compliance levels following mandatory IFRS adoption: evidence from a developing country
    Bova, F.; Pereira, R.
  • A commentary on issues relating to the enforcement of International Financial Reporting Standards in the EU
    Brown, P.; Tarca, A.
  • Goodwill accounting in Malaysia and the transition to IFRS–A compliance assessment of large first year adopters
    Carlin, T.M.; Finch, N.; Laili, N.H.
  • Do investors value the nonfinancial disclosure in emerging markets?
    Chauhan, Y.; Kumar, S.B.
  • Disclosure about fair value measurement for goodwill impairment test: an examination of determinants and usefulness
    Chen, V.; Feng, G.
  • Do analysts matter for governance? Evidence from natural experiments
    Chen, T.; Harford, J.; Lin, C.
  • A critical analysis of the independence of the internal audit function: evidence from Australia
    Christopher, J.; Sarens, G.; Leung, P.
  • Goodwill, triggering events, and impairment accounting
    Comiskey, E.E.; Mulford, C.W.
  • Auditor size and audit quality
    DeAngelo, L.E.
  • The real effects of financial shocks: evidence from exogenous changes in analyst coverage
    Derrien, F.; Kecskés, A.
  • Why firms comply voluntarily with IAS: an empirical analysis with Swiss data
    Dumontier, P.; Raffournier, B.
  • Risk, return, and equilibrium: empirical tests
    Fama, E.; MacBeth, J.
  • The joint effect of investor protection and Big 4 audits on earnings quality around the world
    Francis, J.R.; Wang, D.
  • Characteristics of a firm's information environment and the information asymmetry between insiders and outsiders
    Frankel, R.; Li, X.
  • Compliance with IFRS 3-and IAS 36-required disclosures across 17 European countries: company-and country-level determinants
    Glaum, M.; Schmidt, P.; Street, D.L.; Vogel, S.
  • Disclosure of goodwill impairment under AASB 136 from 2005-2010
    Guthrie, J.; Pang, T.T.
  • Leading indicators of goodwill impairment
    Hayn, C.; Hughes, P.J.
  • Internal corporate governance, CEO turnover, and earnings management
    Hazarika, S.; Karpoff, J.M.; Nahata, R.
  • Stock performance and intermediation changes surrounding sustained increases in disclosure
    Healy, P.M.; Hutton, A.P.; Palepu, K.G.
  • Compliance with IFRS disclosure requirements and individual analysts' forecast errors
    Hodgdon, C.; Tondkar, R.H.; Harless, D.W.; Adhikari, A.
  • Compliance with International Financial Reporting Standards and auditor choice: new evidence on the importance of the statutory audit
    Hodgdon, C.; Tondkar, R.H.; Adhikari, A.; Harless, D.W.
  • International accounting regulation and IFRS implementation in Europe and beyond–experiences with first-time adoption in Europe
    Hoogendoorn, M.
  • Australia's switch to international financial reporting standards: a perspective from account preparers
    Jones, S.; Higgins, A.D.
  • Management earnings forecasts and value of analyst forecast revisions
    Kim, Y.; Song, M.
  • Audit quality and the pricing of discretionary accruals
    Krishnan, G.V.
  • Voluntary disclosure and equity offerings: reducing information asymmetry or hyping the stock?
    Lang, M.H.; Lundholm, R.J.
  • Compliance with goodwill-related mandatory disclosure requirements and the cost of equity capital
    Mazzi, F.; André, P.; Dionysiou, D.; Tsalavoutas, I.
  • The effect of corruption and culture on mandatory disclosure compliance levels: goodwill reporting in Europe
    Mazzi, F.; Slack, R.; Tsalavoutas, I.
  • Hypothesis testing with efficient method of moments estimation
    Newey, W.K.; West, K.D.
  • How do firms implement impairment tests of goodwill?
    Petersen, C.; Plenborg, T.
  • Evidence on the use of unverifiable estimates in required goodwill impairment
    Ramanna, K.; Watts, R.L.
  • Large firms envision worldwide convergence of standards
    Street, D.L.
  • Observance of international accounting standards: factors explaining non-compliance
    Street, D.L.; Gray, S.J.
  • Conservatism in accounting part I: explanations and implications
    Watts, R.L.
  • Implications of the IFRS goodwill accounting treatment
    Wines, G.; Dagwell, R.; Windsor, C.
  • Accounting discretion and purchase price allocation after acquisitions
    Zhang, I.X.; Zhang, Y.