Goodwill impairment, economic policy uncertainty and CEO overconfidence

The implementation of the impairment method for goodwill has sparked debate since its introduction over its discretionary nature. While previous studies have explored the factors affecting goodwill impairments, they mainly focused on firm-level determinants, often ignoring broader economic and policy contexts. Our research adopts a macro-level perspective, investigating how firms adjust their goodwill impairments in response to Economic and Policy Uncertainty (EPU). Using a sample of US listed firms from 2003 to 2020, we find that higher EPU leads to increased goodwill impairment. However, this effect is mitigated by overconfident CEOs, even when firms perform poorly and face prolonged EPU.