Please use this identifier to cite or link to this item: http://hdl.handle.net/1893/24464
Appears in Collections:Accounting and Finance Journal Articles
Peer Review Status: Refereed
Title: Compliance with goodwill-related mandatory disclosure requirements and the cost of equity capital
Authors: Mazzi, Francesco
André, Paul
Dionysiou, Dionysia
Tsalavoutas, Ioannis
Contact Email: dionysia.dionysiou@stir.ac.uk
Keywords: Accounting disclosure
compliance
cost of equity capital
goodwill
IAS36
IFRS3
impairments
Issue Date: 2017
Citation: Mazzi F, André P, Dionysiou D & Tsalavoutas I (2017) Compliance with goodwill-related mandatory disclosure requirements and the cost of equity capital, Accounting and Business Research, 47 (3), pp. 268-312.
Abstract: Theory suggests that increased levels of corporate disclosure lead to a decrease in cost of equity via the reduction of estimation risk. We examine compliance levels with IFRS 3 and IAS 36 mandated goodwill related disclosure and their association with firms’ implied cost of equity capital (ICC). Using a sample of European firms for the period 2008 to 2011, we find a median compliance level of about 83% and significant differences in compliance levels across firms and time. Non-compliance relates mostly to proprietary information and information that reveals managers’ judgment and expectations. Overall, we find a statistically significant negative relationship between the ICC and compliance with mandated goodwill related disclosure. Further, we split the sample between firms meeting (or not) market expectations about the recognition of a goodwill impairment loss in a given year to study whether variation in compliance levels mainly plays a confirmatory or a mediatory role. We find the latter: higher compliance levels matter only for the sub-sample of firms that do not meet market expectations regarding goodwill impairment. Finally, our results hold only in countries where enforcement is strong.
DOI Link: http://dx.doi.org/10.1080/00014788.2016.1254593
Rights: This item has been embargoed for a period. During the embargo please use the Request a Copy feature at the foot of the Repository record to request a copy directly from the author. You can only request a copy if you wish to use this work for your own research or private study. This is an Accepted Manuscript of an article published by Taylor & Francis Group in Accounting and Business Research on 05 Dec 2016, available online: http://www.tandfonline.com/10.1080/00014788.2016.1254593

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