Empirical Goodwill Research: Insights, Issues, and Implications for Standard Setting and Future Research

This paper reviews the empirical literature on the determinants and decision usefulness goodwill reporting. We structure our discussion around five guiding questions that reflect policy issues: recognition, initial and subsequent measurement, disclosure, and the of governance and monitoring. In addition to summarizing the findings, we assess the validity the evidence. Our review indicates that goodwill amounts, on average, are associated with the economics of the combining firms but are also shaped by managerial incentives and context. Empirical research does not allow us to conclude whether current goodwill rules provide for an optimal degree of discretion. Nonetheless, our analysis yields a of policy implications and research suggestions. In addition to pointing out new research that could be addressed by further archival research, we advocate reproduction studies to the generalizability of existing findings across contexts, and we encourage standard setters to quasi-experiments to generate causal evidence and to render policymaking more accountable. We further suggest that researchers make more use of behavioral theories and non-archival to elucidate the motives and interactions of decision makers in goodwill accounting.