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The impact of industry competition on the value relevance of goodwill impairments across different information environments

Ahmad Alshehabi Orcid Logo, Hussein Halabi, Sami Adwan, Sabri Boubaker Orcid Logo

Journal of International Accounting, Auditing and Taxation, Volume: 56, Start page: 100639

Swansea University Author: Sabri Boubaker Orcid Logo

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DOI (Published version): 10.1016/j.intaccaudtax.2024.100639

Abstract

Building upon prior studies that explore the impact of competition on financial reporting quality, this paper investigates the influence of industry-level competition on the value relevance of goodwill impairments. Additionally, it examines whether this impact is more pronounced for firms operating...

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Published in: Journal of International Accounting, Auditing and Taxation
ISSN: 1061-9518
Published: Elsevier BV 2024
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URI: https://cronfa.swan.ac.uk/Record/cronfa67517
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spelling 2025-02-06T13:46:32.9338144 v2 67517 2024-09-02 The impact of industry competition on the value relevance of goodwill impairments across different information environments 43999fff86cd8a29f4815fb4dfa47729 0000-0002-6416-2952 Sabri Boubaker Sabri Boubaker true false 2024-09-02 CBAE Building upon prior studies that explore the impact of competition on financial reporting quality, this paper investigates the influence of industry-level competition on the value relevance of goodwill impairments. Additionally, it examines whether this impact is more pronounced for firms operating in countries with rich information environments. We analyze 21,224 firm-year observations from companies in 21 countries that reported under International Financial Reporting Standards (IFRS). We find that companies facing higher product market competition tend to report impairment losses that are relevant to investors’ equity valuation decisions. This is consistent with the notion that companies in competitive industries are subject to greater scrutiny and have fewer incentives to manipulate their impairment reporting. We also find that the impact of industry competition on the value relevance of goodwill impairments is more pronounced in the rich information environments of market-based economies than bank-oriented economies. These findings underscore the impact of competition and its interplay with the information environment on the market perception of accounting information that is subject to managerial discretion. Journal Article Journal of International Accounting, Auditing and Taxation 56 100639 Elsevier BV 1061-9518 Value relevance; Goodwill impairment; Product market competition; Information environment 1 9 2024 2024-09-01 10.1016/j.intaccaudtax.2024.100639 COLLEGE NANME Management School COLLEGE CODE CBAE Swansea University 2025-02-06T13:46:32.9338144 2024-09-02T15:08:21.5397754 Faculty of Humanities and Social Sciences School of Management - Accounting and Finance Ahmad Alshehabi 0000-0002-8341-8714 1 Hussein Halabi 2 Sami Adwan 3 Sabri Boubaker 0000-0002-6416-2952 4 67517__32592__9db3caf76cda4acf83e02bfb8ca14fd0.pdf 67517.VoR.pdf 2024-10-11T11:26:41.3121319 Output 673709 application/pdf Version of Record true © 2024 University of Southampton. This is an open access article under the CC BY license. true eng http://creativecommons.org/licenses/by/4.0/
title The impact of industry competition on the value relevance of goodwill impairments across different information environments
spellingShingle The impact of industry competition on the value relevance of goodwill impairments across different information environments
Sabri Boubaker
title_short The impact of industry competition on the value relevance of goodwill impairments across different information environments
title_full The impact of industry competition on the value relevance of goodwill impairments across different information environments
title_fullStr The impact of industry competition on the value relevance of goodwill impairments across different information environments
title_full_unstemmed The impact of industry competition on the value relevance of goodwill impairments across different information environments
title_sort The impact of industry competition on the value relevance of goodwill impairments across different information environments
author_id_str_mv 43999fff86cd8a29f4815fb4dfa47729
author_id_fullname_str_mv 43999fff86cd8a29f4815fb4dfa47729_***_Sabri Boubaker
author Sabri Boubaker
author2 Ahmad Alshehabi
Hussein Halabi
Sami Adwan
Sabri Boubaker
format Journal article
container_title Journal of International Accounting, Auditing and Taxation
container_volume 56
container_start_page 100639
publishDate 2024
institution Swansea University
issn 1061-9518
doi_str_mv 10.1016/j.intaccaudtax.2024.100639
publisher Elsevier BV
college_str Faculty of Humanities and Social Sciences
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hierarchy_top_id facultyofhumanitiesandsocialsciences
hierarchy_top_title Faculty of Humanities and Social Sciences
hierarchy_parent_id facultyofhumanitiesandsocialsciences
hierarchy_parent_title Faculty of Humanities and Social Sciences
department_str School of Management - Accounting and Finance{{{_:::_}}}Faculty of Humanities and Social Sciences{{{_:::_}}}School of Management - Accounting and Finance
document_store_str 1
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description Building upon prior studies that explore the impact of competition on financial reporting quality, this paper investigates the influence of industry-level competition on the value relevance of goodwill impairments. Additionally, it examines whether this impact is more pronounced for firms operating in countries with rich information environments. We analyze 21,224 firm-year observations from companies in 21 countries that reported under International Financial Reporting Standards (IFRS). We find that companies facing higher product market competition tend to report impairment losses that are relevant to investors’ equity valuation decisions. This is consistent with the notion that companies in competitive industries are subject to greater scrutiny and have fewer incentives to manipulate their impairment reporting. We also find that the impact of industry competition on the value relevance of goodwill impairments is more pronounced in the rich information environments of market-based economies than bank-oriented economies. These findings underscore the impact of competition and its interplay with the information environment on the market perception of accounting information that is subject to managerial discretion.
published_date 2024-09-01T14:00:10Z
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