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- Title
CEO Overconfidence and the Timeliness of Goodwill Impairments.
- Authors
Chung, Byung Hun; Hribar, Paul
- Abstract
We use survival analysis techniques to examine whether overconfidence affects the likelihood and timeliness of goodwill impairments. We predict that overconfident CEOs have a lower likelihood of impairment in any firm-quarter, and take longer, on average, to impair goodwill. Using the Cox proportional-hazards model and the accelerated failure time model, we find evidence consistent with both predictions. In cross-sectional tests, we find having more financial experts on the board mitigates the effect of CEO overconfidence on the timeliness of goodwill impairments, while uncertainty in predicting a firm's future performance strengthens the effect. Additional results show that overconfident CEOs hold overly optimistic expectations of their firms' performance, and that they underweight negative market signals prior to the impairment decisions.
- Subjects
CHIEF executive officers; CONFIDENCE; GOODWILL (Commerce); ORGANIZATIONAL performance; MERGERS &; acquisitions; FINANCIAL statements; DECISION making in business
- Publication
Accounting Review, 2021, Vol 96, Issue 3, p221
- ISSN
0001-4826
- Publication type
Article
- DOI
10.2308/TAR-2016-0555