Skip navigation

Accounting discretion in family firms: the analysis of goodwill impairment

Accounting discretion in family firms: the analysis of goodwill impairment

Neri, Lorenzo ORCID: 0000-0001-6627-0386 and Greco, Giulio (2017) Accounting discretion in family firms: the analysis of goodwill impairment. [Working Paper] (Unpublished)

[img] PDF (Author Draft Manuscript)
16795 NERI_Analysis_of_Goodwill_Impairment_2017.pdf - Draft Version
Restricted to Registered users only

Download (117kB)


In recent years, the family business literature has been featured by an increasing interest on accounting choices in family firms. In this paper, we attempt to contribute to this growing stream of literature and, basing on the socio-emotional wealth (SEW) perspective, we focus on the differences within family firms regarding accounting discretion in goodwill impairment decisions. We investigate a sample of US public firms in the period 2003-2015. As predicted by the SEW, our findings show that family firms are less likely to exploit discretion in goodwill impairment decisions than non-family firms. We also find that first generation family firms are more likely to exploit accounting discretion in goodwill impairment decisions than second or later family firms. First generation family firms display SEW concerns different from those of second or later generation family firms. This leads to a different approach to goodwill impairment.

Our paper can contribute to earnings management literature in family firms. We show that family firms cannot be considered as a homogeneous group with the same propensity to exploit the discretion allowed by accounting rules in highly subjective fair value measurements. We suggest that earnings management literature needs a more fine-grained investigation on how family ownership affect accounting discretion. Once the firm control is ensured, the level of ownership may be less relevant than other features, such as the generational stage. Our paper can also contribute to family business studies. We show that SEW concerns affect complex fair value measurements with relevant impact on the financial markets, on the assessment of the firm’s health and ultimately on the controlling family supervising activity of the management. Our study has practical implications. Investors, banks, bondholders and lenders are now informed that goodwill financial reporting quality can vary across family firms at different generational stages and that SEW-related concerns can affect goodwill write-off decision in first generation family firms.

Item Type: Working Paper
Uncontrolled Keywords: Family business, Goodwill, Impairment, Socio-emotional wealth
Subjects: H Social Sciences > HF Commerce > HF5601 Accounting
Faculty / School / Research Centre / Research Group: Faculty of Business
Faculty of Business > Department of Accounting & Finance
Last Modified: 18 May 2019 22:27

Actions (login required)

View Item View Item


Downloads per month over past year

View more statistics