SHORT AND LONG TERM EFFECT OF GOODWILL IMPAIRMENT ANNOUNCEMENTS ON THE SHARE PRICES OF EUROPEAN BASED LISTED COMPANIES
This research investigates the effect of goodwill impairments on the share prices of European listed companies. Theabnormal returns in the(-5,5), (-3,3), (-1,1) and (0,3)event period surrounding a goodwill impairment and the yearprior to a goodwill impairment announcement are investigated. In the (-5,5) event period a positive cumulative abnormal return of 1.90%isfound.Acumulativebuyandholdabnormalreturnof-3.90%isfoundforthefirstninemonthsoftheyear priortothegoodwillimpairmentanda-0.30%cumulativebuyandholdabnormalreturnisfoundforthetotalyear priortothegoodwillimpairment.Anexplanationfortheseresultsisthatinvestorsanticipategoodwillimpairments and that therefore, the negative reaction to a goodwill impairment happens long before the announcement of the impairment.Anpessimistic anticipation by investors might be the reason why the actual impairment announcement is receivedas positive news.Therelativesizeoftheimpairment,therelativeamountofgoodwillinacompanyand the level of information asymmetry between a company and its investorsare investigated on their influence on both the surprise effect andthe level of anticipation. There is some proof that the positive reactionintheshorttermandthenegativereactioninthelongtermareduetoanticipatinginvestors.
|Organisation||Erasmus School of Economics|
Velden, D. van der. (2020, June 12). SHORT AND LONG TERM EFFECT OF GOODWILL IMPAIRMENT ANNOUNCEMENTS ON THE SHARE PRICES OF EUROPEAN BASED LISTED COMPANIES. Financial Economics. Retrieved from http://hdl.handle.net/2105/52329