Effect of human resource investments in internal controls on goodwill impairment
Abstract
Purpose
This study aims to investigate the impact of human resource investment in internal controls (hereinafter, IC personnel) on managers’ goodwill impairment decisions.
Design/methodology/approach
The authors use the ratio of IC personnel to the number of employees in the firm and the average work experience of IC personnel as quantitative and qualitative measures for IC personnel, respectively.
Findings
The authors find that the relationship between the likelihood of impairment and the expected impairment is not associated with the ratio of IC personnel. However, the average experience of IC personnel increases the likelihood that a company will record an impairment when there are market and financial indicators of impairment. The findings suggest that the effectiveness of IC is determined by practical proficiency rather than size. Furthermore, our analyses demonstrate that the greater the experience of the IC personnel in the accounting/finance or IT departments, the more likely the manager will record an expected impairment. Overall, our findings emphasize the importance of IC personnel expertise to enhance the effectiveness of IC for financial reporting.
Originality/value
Using unique data available only in Korea, to the best of the authors’ knowledge, this is the first study to show the effect of human resource investment in IC on goodwill impairment.
Keywords
Acknowledgements
Eun Hye Jo acknowledges financial support from the Ministry of Education of the Republic of Korea and the National Research Foundation of Korea (NRF-2020S1A5B5A16083063).
The authors are grateful to Professor Tom Scott and two anonymous reviewers whose suggestions have considerably improved this paper. Any remaining errors are our own.
Citation
Jo, E.H. and Lee, J.W. (2023), "Effect of human resource investments in internal controls on goodwill impairment", Pacific Accounting Review, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/PAR-01-2023-0013
Publisher
:Emerald Publishing Limited
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