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A Path Analysis of Goodwill Impairment – Does Corporate Governance Matter?

Author

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  • Ferreira Leonor Fernandes

    (Nova School of Business and Economics – Universidade Nova de Lisboa, Portugal)

  • Fernandes Joaquim Santana

    (Escola Superior de Gestão, Hotelaria e Turismo – Universidade do Algarve, Portugal)

  • Rebelo Efigénio

    (Faculdade de Economia – Universidade do Algarve, Portugal)

Abstract

Objective This paper examines the extent to which different corporate governance mechanisms affect the recognition and measurement of goodwill impairment, considering that these decisions are affected by a complex set of factors such as variables associated with corporate governance, economic/financial variables, and the market. Methodology We used data from 110 companies, both Spanish (75) and Portuguese (35), with listed securities, in the period 2010–2016 (unbalanced panel), and the path analysis method to infer financial and non-financial data relationships. Findings The results support the hypothesis that attributes linked to management and internal and external control mechanisms, as well as economic/financial, market and location variables, are directly and indirectly associated with the recognition of goodwill impairment. Value Added This paper outlines a company behavioral profile where opportunity seems to prevail over timely recognition and measurement of goodwill impairment. Big bath practices appear to be well founded, as well as the alignment of this strategy with market signals. Recommendations To foster the adoption of accounting practices close to the interests of all stakeholders, regulators should be encouraged to incentivize corporate governance models that promote the periodic rotation of the chief executive officer/chairman, the independence of all members of the statutory audit board, and training in economic and financial areas.

Suggested Citation

  • Ferreira Leonor Fernandes & Fernandes Joaquim Santana & Rebelo Efigénio, 2024. "A Path Analysis of Goodwill Impairment – Does Corporate Governance Matter?," Journal of Intercultural Management, Sciendo, vol. 16(1), pages 5-48, March.
    • Handle: RePEc:vrs:joinma:v:16:y:2024:i:1:p:5-48:n:1
    DOI: 10.2478/joim-2024-0001
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    More about this item

    Keywords

    Corporate governance; goodwill impairment; path analysis;
    All these keywords.

    JEL classification:

    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation
    • N24 - Economic History - - Financial Markets and Institutions - - - Europe: 1913-

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