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(IR) Relevance of goodwill impairment: the case of European banking (2005–2015)

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Abstract

The traditional model of systematic amortization over its useful life was replaced by the annual application of an impairment test, with the intention of correcting the problems of the lack of relevance and difficulty in estimating said useful life of the previous regulatory framework. The aim of this study is to investigate whether the application of the impairment test between 2005 and 2015 in the main European banks has overcome these problems or whether, on the contrary, its application by managers has been discretionary, opportunistic and arbitrary, presenting, as a result, artificially inflated earnings. Our results obtained show that systematic amortisation has been replaced by opportunistic impairment, which does not reflect the economic conditions underlying the financial activity of the main European banks, which gives rise to less relevant financial information and possible harmful pro-cyclical effects.

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Notes

  1. “Appendix 1” contains a list of the entities comprising the sample under analysis.

  2. Also, these variables have been studied in previous research.

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Authors and Affiliations

  1. Business School, Alcala University, Madrid, Spain

    Jorge Pallarés Sanchidrián

  2. Department of Economics and Management, Alcala University, Madrid, Spain

    Jorge Pallarés Sanchidrián, Javier Pérez García & José A. Gonzalo-Angulo

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  1. Jorge Pallarés Sanchidrián
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  2. Javier Pérez García
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  3. José A. Gonzalo-Angulo
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Correspondence to Jorge Pallarés Sanchidrián.

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Appendices

Appendix 1: List of entities of the analysed sample

Name of entity

Country

ABN AMRO Group NV

NL

Alpha Bank AE

EL

Allied Irish Banks, Pic

IE

Banca Monte dei Paschi di Siena SpA

IT

Banco Bilbao Vizcaya Argentaria, SA

ES

Banco BPI, SA

PT

Banco de Sabadell, SA

ES

Banco Popolare Società Cooperativa

IT

Banco Popular Español SA

ES

Banco Santander, SA

ES

Bankinter SA

ES

Banque et Caisse d’Epargne de l’Etat, Luxembourg

LU

Barclays Plc

UK

Bayerische Landesbank

DE

BNP Paribas SA

FR

Caixa Geral de Depósitos, SA

PT

Commerzbank AG

DE

Cooperatieve Rabobank U.A.

NL

Credit Agricole SA

FR

Credit Mutuel Group

FR

DekaBank Deutsche Girozentrale

DE

Deutsche Bank AG

DE

Dexia SA

BE

DNB ASA

DE

DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main

DE

Erste Group Bank AG

AT

Espirito Santo Financial Group SA

PT

Fundacion Bancaria Caixa d’Estalvis i Pensions de Barcelona, ”la Caixa”

ES

Governor and Company of the Bank of Ireland

IE

Groupe BPCE

FR

HSBC Holdings Plc

UK

HSH Nordbank AG

DE

Hypo Real Estate Holding AG

DE

ING Bank NV

NL

Intesa Sanpaolo SpA

IT

Lloyds Banking Group Plc

UK

Natixis SA

FR

Nordea Bank AB

FI

OP Financial Group

PL

Powszechna Kasa Oszczednosci Bank Polski SA

PL

Royal Bank of Scotland Group Plc

UK

Societe Generale SA

FR

Standard Chartered Plc

UK

UniCredit SpA

IT

Unione di Banche Italiane SpA

IT

Appendix 2: Behaviour of model variables

figure a

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Pallarés Sanchidrián, J., Pérez García, J. & Gonzalo-Angulo, J.A. (IR) Relevance of goodwill impairment: the case of European banking (2005–2015). J Bank Regul 22, 24–38 (2021). https://doi.org/10.1057/s41261-020-00126-0

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