It's dark under the lamp? The moderating role of executives' accounting competence on relationship between goodwill impairment signal and goodwill impairment
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View abstract on PubMed
Summary
This summary is machine-generated.Executives
Area Of Science
- Accounting
- Corporate Finance
- Corporate Governance
Background
- Goodwill impairment is a significant accounting event impacting financial statements.
- Executive characteristics, such as accounting competence, can influence financial reporting decisions.
- Performance compensation commitments add complexity to executive decision-making regarding asset valuation.
Purpose Of The Study
- To investigate how executives' accounting competence affects the relationship between goodwill impairment signals and actual goodwill impairment.
- To examine the moderating role of performance compensation commitment in this relationship.
- To explore the influence of equity incentives and auditor scrutiny on this effect.
Main Methods
- Empirical research using data from Chinese A-share listed companies (2007-2022).
- Analysis of companies with signed performance compensation commitment agreements.
- Statistical methods to test the hypotheses regarding executive accounting competence and goodwill impairment.
Main Results
- Executive accounting competence weakens the link between goodwill impairment signals and goodwill impairment.
- Higher accounting competence is associated with a lower probability and smaller scale of goodwill impairment.
- The negative effect is more pronounced when performance compensation commitment is between 80% and 100%.
Conclusions
- Executives' accounting competence plays a crucial role in mitigating opportunistic reporting of goodwill impairment.
- The findings have implications for accounting standard setting and capital market supervision.
- Understanding executive traits is vital for assessing the reliability of financial reporting, particularly concerning goodwill.
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