Determinants of goodwill impairment disclosure: the role of audit quality and analysts following
ISSN: 0307-4358
Article publication date: 16 August 2022
Issue publication date: 2 January 2023
Abstract
Purpose
The authors investigate the effect of audit quality and analysts' coverage on firms' compliance concerning goodwill impairment testing and disclosure requirements with the Indian Accounting Standard (Ind AS) over the period of 2017–2020.
Design/methodology/approach
The authors conduct univariate analysis and employ pooled ordinary least square (POLS) and Fama–MacBeth (FMB) regression techniques for empirical testing.
Findings
The authors report a substantially higher disclosure score (DS) for firms with superior audit quality and for firms with incidence of analysts' coverage. Moreover, the authors show a positive impact of audit quality on the firm's degree of disclosure. This signifies better compliance by the clients of Big-4 audit firms in the enforcement of standard's mandates. Besides, the results on analysts' coverage indicate that the increasing number of analysts discipline managers in terms of appropriate compliance with disclosure requirements, hence favours the monitoring effect hypothesis for Indian firms. The results are robust to the alternate measures of key regressors, set of firm controls and alternate estimation technique.
Originality/value
The study adds to the knowledge concerning the economic consequences of mandatory disclosures and is possibly the first to investigate compliance related to goodwill impairment disclosure regime under the new Ind AS.
Keywords
Citation
Ranga, A. and Pathak, R. (2023), "Determinants of goodwill impairment disclosure: the role of audit quality and analysts following", Managerial Finance, Vol. 49 No. 1, pp. 88-109. https://doi.org/10.1108/MF-03-2022-0115
Publisher
:Emerald Publishing Limited
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