Does Writing Down Goodwill Imperil a CEO's Job?

Cowan, Arnold
Jeffrey, Cynthia
Wang, Qian
Journal Title
Journal ISSN
Volume Title
We find that accounting charges for goodwill impairment provide meaningful signals to corporate boards concerning CEO performance in selecting and conducting acquisitions. We examine 5,990 firms that completed acquisitions and investigate the relation between CEO turnover and goodwill impairment during 2002–2016. The results show that the amount of goodwill impairment recognized prior to the departure is positively associated with forced, but not voluntary, CEO turnovers. Pre-turnover goodwill impairment is higher for firms with forced CEO turnovers than for firms with voluntary turnover. This implies that goodwill impairment provides information before CEO changes occur. We find only the unexpected component of goodwill impairment is informative and associated with forced CEO turnover. Results also show that the association between goodwill impairment and forced CEO turnover varies as the audit quality changes, suggesting the reliability of accounting information influences the board’s CEO retention decision.
Goodwill impairment, CEO turnover, Mergers and acquisitions
Access Rights
Email if you need this content in ADA-compliant format.