The usefulness of goodwill information to financial analysts: a qualitative approach

Jari Huikku, Hanna Silvola, Jan Mouritsen

Tutkimustuotos: Artikkeli kirjassa/konferenssijulkaisussaAbstractScientificvertaisarvioitu


This paper studies financial analysts’ uses of goodwill information. While other research on
financial accounting’s uses has focused on the magnitude or relevance of items in financial
accounting, our study adopts a practice perspective, analysing how analysts make sense of
financial accounting. We investigate this phenomenon in the context of goodwill accounting
and pose the research question: How do financial analysts use goodwill information in firm
valuation processes? Drawing on the ideas of reflexive modelling, the paper analyses how
financial analysts use accounting. Analysts are disappointed with goodwill information
because it does not seem to fit their valuation purposes. Interestingly, however, although the
goodwill asset initially disappoints them, it appears to have the capacity to turn into a catalytic
asset, which helps mediate relations among other assets. Namely, goodwill impairment
testing (GIT) is typically conducted in a value-in-use format as it is analogous to a company’s
DCF valuation, with the most common valuation method by financial analysts. Based on our
field study findings, we suggest that with the aid of GIT information, analysts can conduct
reflexive modelling to say something about the firm’s future and develop an entity
perspective on the firm. In reflexive modelling, analysts check their estimates about the
model’s outcome against the firm’s. This checking considers available public information but
co-occurs in private dialogues with the firm’s managers. A dissonance in estimates prompts
doubt, stimulating additional search to evaluate the company’s value. As our main
contribution, we extend prior literature about the usefulness of goodwill information for
analysts. More specifically, we add nuance to the literature by demonstrating how analysts
use this information by reflexive modelling. Accordingly, we maintain that contrary to
suggestions by the scholars, goodwill accounting numbers are not necessarily just ignored in
firm valuation but can have economic significance for analysts.
TilaJulkaistu - 2022
OKM-julkaisutyyppiEi oikeutettu
TapahtumaAuckland Region Accounting Conference - Auckland, Uusi-Seelanti
Kesto: 28 marrask. 202228 marrask. 2022


ConferenceAuckland Region Accounting Conference


Sukella tutkimusaiheisiin 'The usefulness of goodwill information to financial analysts: a qualitative approach'. Ne muodostavat yhdessä ainutlaatuisen sormenjäljen.
  • Best paper award

    Huikku, Jari (Recipient), 28 marrask. 2022

    Palkinto: Palkinto tai huomionosoitus tuotoksesta

Siteeraa tätä