Economic Policy Uncertainty And Goodwill Impairment

Abstract

Following the adoption of SFAS 142 in 2001, not only has it altered how businesses evaluate goodwill, but it has also drawn upon numerous studies examining this intangible asset. This paper continues this trend by investigating the relationship between economic policy uncertainty (EPU) and goodwill impairment decisions of the U.S. listed firms for the period 2002-2019. The paper finds that economic policy uncertainty negatively affects the incidence of goodwill impairment of the firm, and this finding holds robust through various robustness tests. Additional analyses reveal that firm life cycles, financial distress, and financial constraints exacerbate the negative relationship between EPU and goodwill impairment. Taken together, this paper makes significant contributions to the goodwill impairment literature, the first evidence about the uncertainty and goodwill impairment relationship, and practical implications for investors and analysts in their investment decisions related to this important type of intangible assets.