Title: Goodwill impairment disclosure and integrated reporting: evidence on credit ratings and earnings manipulation

Authors: Athanasios Pavlopoulos; George Emmanuel Iatridis

Addresses: Department of Economics, University of Thessaly, Volos, 38 333, Greece ' Department of Economics, University of Thessaly, Volos, 38-333, Greece; College of Administrative Sciences and Economics, Koc University, Istanbul, Turkey; School of Social Sciences, Hellenic Open University, Patras, Greece

Abstract: This study examines the effect of goodwill impairment disclosure quality and integrated reporting (IR) compliance on earnings manipulation and credit ratings. We assess whether IR and goodwill impairment disclosure quality are associated with managerial behaviour. We find that firms with goodwill impairment are likely to use earnings manipulation and display lower IR compliance and goodwill impairment disclosure quality. We examine the impact of managerial discretion over goodwill impairment on the decision to publish voluntary IR information. We find that companies are likely to voluntarily adopt IR when goodwill impairment is low and goodwill impairment disclosure quality is high. When we broaden our investigation to companies that have already adopted IR, we find that IR compliance is likely to decrease earnings manipulation, increase credit ratings and improve the quality of goodwill impairment disclosure even in the presence of goodwill impairment. Our results highlight the informativeness of IR compliance and support the need for firms to disclose goodwill impairment losses in order to reduce information asymmetry and uncertainty.

Keywords: integrated reporting; goodwill impairment; credit ratings; voluntary disclosure; earnings manipulation.

DOI: 10.1504/IJBAAF.2023.129339

International Journal of Banking, Accounting and Finance, 2023 Vol.13 No.3, pp.341 - 387

Received: 29 Oct 2021
Accepted: 26 Sep 2022
Published online: 06 Mar 2023 *