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An Empirical Investigation of Goodwill in Austria: Evidence on Management Change and Cost of Capital
Author(s) -
Iatridis George Emmanuel,
Senftlechner Daniel
Publication year - 2014
Publication title -
australian accounting review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.551
H-Index - 36
eISSN - 1835-2561
pISSN - 1035-6908
DOI - 10.1111/auar.12014
Subject(s) - goodwill , business , accounting , audit , cost of capital , cash , capital (architecture) , finance , economics , incentive , archaeology , microeconomics , history
This study assesses whether new chief executive officers (CEOs) or CEOs in their early tenure carry out goodwill impairments more intensively than senior CEOs. Further, it investigates the relationship between cost of capital and goodwill, as well as whether companies that report goodwill and are audited by a Big 4 auditor display lower cost of capital. The findings show that a change in CEO does not significantly lead to higher goodwill impairments. Using Austria as a case study, the study finds that, in the years of their early tenure, CEOs in Austria generally do not adopt goodwill impairment‐related opportunistic behaviours. This study indicates that companies that have carried out goodwill impairment tend to display higher cost of capital, reflecting the potential uncertainty about their future prospects and cash generating ability. The findings show that companies that report goodwill and are audited by a Big 4 auditor tend to display lower cost of capital.