IDEAS home Printed from https://ideas.repec.org/a/taf/rcjaxx/v8y2020i2p183-213.html
   My bibliography  Save this article

Failure in performance commitment and goodwill impairment: evidence from M&As

Author

Listed:
  • Hongqi Yuan
  • Chong Gao
  • Haina Shi

Abstract

We examine whether and how the failure in performance commitment by an acquiree affects the acquirers’ recognition of goodwill impairment. Based on a sample of A-share-listed firms during 2008–2016, we document the following evidence. First, both the likelihood and amounts of goodwill impairment increase significantly if an acquiree fails to meet the performance commitment. The results are robust to alternative measures of failed commitment and alternative sampling. Second, the relation is more pronounced (i) in the bear markets than in the bull markets, and (ii) for voluntary adoption of commitment terms than for mandatory ones. Third, the likelihood of goodwill impairment in the post-commitment period increases if an acquiree successfully met the commitment, especially if the acquiree met the commitment through earnings management. Last but not least, timely recognition of goodwill impairment for failed commitments leads to a reduction of future stock price crash risk.

Suggested Citation

  • Hongqi Yuan & Chong Gao & Haina Shi, 2020. "Failure in performance commitment and goodwill impairment: evidence from M&As," China Journal of Accounting Studies, Taylor & Francis Journals, vol. 8(2), pages 183-213, April.
    • Handle: RePEc:taf:rcjaxx:v:8:y:2020:i:2:p:183-213
    DOI: 10.1080/21697213.2020.1822028
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/21697213.2020.1822028
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/21697213.2020.1822028?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.

    Citations

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


    Cited by:

    1. Sun, Zeyu & Kong, Ningning & Wu, Lei & Bao, Yu, 2024. "Does contingent payment in M&As induce acquirers’ earnings management? Evidence from performance commitment," Research in International Business and Finance, Elsevier, vol. 69(C).
    2. Zhang, Xing & Li, Yiwen & Ji, Mingcan & Wang, Jiabian, 2024. "Does ESG help reduce the goodwill impairment?—From perspectives of information increment and information manipulation," Finance Research Letters, Elsevier, vol. 64(C).
    3. Dahlen, Niklas & Lahmann, Alexander & Schreiter, Maximilian, 2024. "Panacea for M&A dealmaking? Investor perceptions of earnouts," Finance Research Letters, Elsevier, vol. 60(C).
    4. Song, Di & Shen, Na & Su, Jun, 2023. "A catering perspective of performance commitment-evidence from acquisitions in China," Pacific-Basin Finance Journal, Elsevier, vol. 78(C).

    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:taf:rcjaxx:v:8:y:2020:i:2:p:183-213. 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.

    We have no bibliographic references for this item. You can help adding them by using 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: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/rcja .

    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.