Goodwill impairment loss and bond credit rating
International Journal of Accounting & Information Management
ISSN: 1834-7649
Article publication date: 6 March 2017
Abstract
Purpose
The purpose of this study is to examine the impact of goodwill impairment losses on bond credit ratings.
Design/methodology/approach
The authors use regression analysis to examine the relationship between goodwill impairment losses and bond credit ratings.
Findings
The empirical results show a negative relationship between the amount of goodwill impairment losses and bond credit ratings, suggesting that firms with goodwill impairment losses receive lower credit ratings. The authors perform various additional tests, including subsamples in good or bad market time, changes analysis, first time goodwill impairment firms vs subsequent impairment and the two-stage least squares regression analysis to address potential endogeneity issues. The main results persist.
Originality/value
This paper links and contributes to two streams of literature: goodwill impairment in accounting literature and bond credit ratings in finance literature. Whether a firm’s goodwill impairment losses affect the firm’s bond credit rating remains an interesting question that has not been examined previously. To the best of the authors’ knowledge, this is the first study that directly examines the relationship between goodwill impairment losses and bond ratings at the firm level.
Keywords
Citation
Sun, L. and Zhang, J.H. (2017), "Goodwill impairment loss and bond credit rating", International Journal of Accounting & Information Management, Vol. 25 No. 1, pp. 2-20. https://doi.org/10.1108/IJAIM-02-2016-0014
Publisher
:Emerald Publishing Limited
Copyright © 2017, Emerald Publishing Limited