Financial Crisis and Impairment Recognition in Non-Financial Assets
PDF
PDF (Português (Brasil))

Keywords

financial crisis
European listed companies
non-financial asset impairments
earnings management

How to Cite

Gaio, C., Gonçalves, T., & Pereira, A. (2021). Financial Crisis and Impairment Recognition in Non-Financial Assets. Review of Business Management, 23(2), 370–387. https://doi.org/10.7819/rbgn.v23i2.4108

Abstract

Purpose – To analyse the impact of the financial crisis on the recognition of non-financial asset impairments in European listed companies.

Theoretical framework – The study explores the impact of the theory of measuring the economic value of non-financial assets on managers’ decisions to recognize impairments, especially in the context of an economic crisis.

Design/methodology/approach – Logit and ordinary least squares models were estimated to analyse the probability of recognition and the amount of impairment recognized, respectively, over a 10-year period.

Findings – The results show that European companies recognized less impairments during the crisis, including companies in countries that have used external financial aid, suggesting that managers may use impairment recognition as a way of practicing earnings management.

Research Practical & Social implications – The results are of interest to several stakeholders, namely: creditors, investors, financial market regulators, entities that prepare and oversee the application of accounting and auditing standards, and ultimately European leaders in terms of structural reforms and investor protection laws.

Originality/value – The study contributes to the literature that analyses the impact of the financial crisis on the recognition of impairments in non-financial assets and, in particular, in the context of greater financial fragility. It also contributes to the literature on the use of discretion in the recognition of impairments and earnings management practices. Moreover, it adds to the theoretical debate regarding the principles of measurement in the context of impairment, and how this may affect assessments of the economic values of non-financial assets.

Keywords – financial crisis; European listed companies; non-financial asset impairments; earnings management.

https://doi.org/10.7819/rbgn.v23i2.4108
PDF
PDF (Português (Brasil))

If a paper is approved for publication, its copyright has to be transferred by the author(s) to the Review of Business Management – RBGN.

Accordingly, authors are REQUIRED to send RBGN a duly completed and signed Copyright Transfer Form. Please refer to the following template: [Copyright Transfer]

The conditions set out by the Copyright Transfer Form state that the Review of Business Management – RBGN owns, free of charge and permanently, the copyright of the papers it publishes. Although the authors are required to sign the Copyright Transfer Form, RBGN allows authors to hold and use their own copyright without restrictions.

The texts published by RBGN are the sole responsibility of their authors.

The review has adopted the CC-BY Creative Commons Attribution 4.0 allowing redistribution and reuse of papers on condition that the authorship is properly credited.