The role of large shareholders in goodwill impairment decisions – Evidence from China

Our paper examines how large shareholders manage goodwill impairment to inflate earnings as well as the role of audit functions in this setting. The influence of large shareholders on corporate decisions is well documented, however, overlooked in goodwill literature. Using data from China, we find that a higher ownership percentage held by large shareholders associates with a lower likelihood of recording goodwill impairment as well as a reduced impairment amount, suggesting that goodwill impairment is intentionally avoided or decreased by large shareholders. We further find that the presence of big4 auditors mitigates such relationship.