The Effects of Goodwill Impairments on Stock Prices
Datum
2014-06
Autor:innen
Luvaas, Austin
Zeitschriftentitel
ISSN der Zeitschrift
Bandtitel
Verlag
University of Oregon
Zusammenfassung
Stock price changes have a profound effect on the everyday lives of the general
population. These fluctuations are heavily influenced by accounting practices because
of their effects on earnings and company valuation. The behavior of stocks is complex
and unpredictable, therefore it is important to study the individual factors that might
influence them. One such factor is goodwill impairment, the stock market effects of
which I examine in this thesis. Goodwill impairment results in the decrease of a
company's book value and is generally regarded as an unfavorable adjustment to incur.
Because of its effect on company value, my thesis examines whether or not goodwill
impairment also affects company stock prices by examining impairments during the
Great Recession of 2007. I hypothesize that the size of a goodwill impairment has a
positive correlation with decreases in stock price, and that the later the goodwill
impairment is incurred relative to the beginning of the Great Recession in September
2007, the larger the negative change in stock price will be. I conduct a statistical
analysis and ordinary least square regression analyses with a sample of 30 companies to
test this hypothesis.
The results of my testing fail to support my hypothesis with statistically significant
evidence. Though some companies saw significant changes in stock price in the period
surrounding a goodwill impairment announcement, the regression analyses do not
display any p-values below the determined significance level. Thus, there is no evidence
to suggest that on average the size or timing of goodwill impairment is correlated with
stock price fluctuations. Though the conclusiveness of my testing is limited by the small
sample size used, the results of my thesis do not suggest that goodwill impairment has a
significant effect on stock prices.
Beschreibung
44 pages. A thesis presented to the Department of Accounting and the Clark Honors College of the University of Oregon in partial fulfillment of the requirements for degree of Bachelor of Arts, Spring 2014.
Schlagwörter
Great Recession, Goodwill, Goodwill impairment, Impairment, Stock, Stock Prices