Qiubin Huang and Mengyuan Xiong
This paper aims to examine the effects of managerial ability (MA) on the likelihood and the timeliness of goodwill impairment and explore whether the desirable effect of MA vary…
Abstract
Purpose
This paper aims to examine the effects of managerial ability (MA) on the likelihood and the timeliness of goodwill impairment and explore whether the desirable effect of MA vary with the degree of agency problems.
Design/methodology/approach
The authors propose a unified framework to simultaneously examine the effects of MA on the likelihood and the timeliness of goodwill impairment by incorporating a market-based impairment indicator (denoted as BTM), MA and the interaction of BTM with MA to this study’s regression model to account for the likelihood of goodwill impairment. BTM addresses the timeliness of goodwill impairment.
Findings
This study finds that firms with higher MA have lower likelihood of goodwill impairment, and such firms are more likely to recognize goodwill impairment in a timely manner when the underlying value of goodwill is economically impaired. This desirable effect of MA is more pronounced in non-state-owned enterprise (SOEs) and firms without chief executive officer (CEO) duality.
Practical implications
Firms can reduce the losses arising from goodwill impairment by enhancing the ability of their management teams combined with improved corporate governance structure.
Originality/value
This paper provides novel insights on understanding the role of MA in not only reducing the likelihood but also enhancing the timeliness of goodwill impairment. The findings help advance the upper echelons theory by uncovering the heterogenous effects of executives with different levels of ability.
Details
Keywords
Leilei Shi, Xinshuai Guo, Andrea Fenu and Bing-Hong Wang
This paper applies a volume-price probability wave differential equation to propose a conceptual theory and has innovative behavioral interpretations of intraday dynamic market…
Abstract
Purpose
This paper applies a volume-price probability wave differential equation to propose a conceptual theory and has innovative behavioral interpretations of intraday dynamic market equilibrium price, in which traders' momentum, reversal and interactive behaviors play roles.
Design/methodology/approach
The authors select intraday cumulative trading volume distribution over price as revealed preferences. An equilibrium price is a price at which the corresponding cumulative trading volume achieves the maximum value. Based on the existence of the equilibrium in social finance, the authors propose a testable interacting traders' preference hypothesis without imposing the invariance criterion of rational choices. Interactively coherent preferences signify the choices subject to interactive invariance over price.
Findings
The authors find that interactive trading choices generate a constant frequency over price and intraday dynamic market equilibrium in a tug-of-war between momentum and reversal traders. The authors explain the market equilibrium through interactive, momentum and reversal traders. The intelligent interactive trading preferences are coherent and account for local dynamic market equilibrium, holistic dynamic market disequilibrium and the nonlinear and non-monotone V-shaped probability of selling over profit (BH curves).
Research limitations/implications
The authors will understand investors' behaviors and dynamic markets through more empirical execution in the future, suggesting a unified theory available in social finance.
Practical implications
The authors can apply the subjects' intelligent behaviors to artificial intelligence (AI), deep learning and financial technology.
Social implications
Understanding the behavior of interacting individuals or units will help social risk management beyond the frontiers of the financial market, such as governance in an organization, social violence in a country and COVID-19 pandemics worldwide.
Originality/value
It uncovers subjects' intelligent interactively trading behaviors.