The role of corporate governance in the write‐off decision

The recent popularity of write‐offs allows for examination of the role governance plays in the write‐off decision. I find that well governed companies are more likely to announce write‐offs. Additionally, better governed firms announce smaller write‐offs relative to poorly governed firms. The evidence also indicates that the stocks of well governed firms experience announcement abnormal returns that are over six percent higher than those of poorly governed firms. The results suggest better governed firms take a pro‐active approach to reveal bad news early, and thereby mitigate further uncertainty for investors.