Does ESG help reduce the goodwill impairment?—From perspectives of information increment and information manipulation

Xing Zhang, Yiwen Li, Mingcan Ji and Jiabian Wang

Finance Research Letters, 2024, vol. 64, issue C

Abstract: An increase in mergers and acquisitions (M&A) leads to a significant increase in the total amount of goodwill in the capital market. However, from time to time, significant goodwill impairment has occurred due to less-than-expected M&A performance. Based on the data of Chinese A-share listed companies from 2011 to 2022, this paper examines the relationship between ESG and goodwill impairment. The findings suggest that ESG performance can provide stakeholders with incremental information, which, in turn, reduces the magnitude of goodwill impairment. However, the resources occupied by the fulfilment of ESG responsibilities crowd out the resources for M&A integration, affecting M&A performance, thereby increasing the possibility of goodwill impairment. In other words, the impact of ESG on goodwill impairment is a balance between positive and negative effects. We also find that the manipulation of ESG disclosures could be an approach to earnings management.

Keywords: Goodwill impairment; ESG; Information manipulation; Information increment; ESG disclosure manipulation (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:64:y:2024:i:c:s1544612324004616

DOI: 10.1016/j.frl.2024.105431

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