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Article

Financial Analyses and Corporate Evaluation on Sustainable Ability to Generate Excess Profit

College of Business Administration, Keimyung University, Daegu 42601, Korea
Sustainability 2020, 12(11), 4647; https://doi.org/10.3390/su12114647
Received: 8 May 2020 / Revised: 28 May 2020 / Accepted: 4 June 2020 / Published: 6 June 2020
(This article belongs to the Special Issue Company Assessment: Basis of Its Sustainable Development)
This study empirically examined financial analyses and a market assessment on goodwill. Goodwill is not an individually identifiable asset but is recognized as an intangible asset because it is viewed as having future economic benefits from a business combination. The verification period for this study was from 2011 to 2019. The sample companies were 13,522 firms-years satisfying the selection criteria among listed companies in the Korean stock market. As a result of empirical analysis, it was found that goodwill is related to stock prices. Goodwill was shown to serve as useful accounting information by reflecting the economic realities of intangible assets called creating excess profitability and sustainable profit. For analysis, regression analysis was conducted by separating the companies listed on the KOSPI stock market and those listed on the KOSDAQ stock market. The results of the analysis were as follows. In the case of listed companies in the KOSPI stock market, goodwill was found to have a positive (+) stock price relationship as useful accounting information. These results suggested that goodwill is an asset that represents the ability to generate excess profit as a sustainable profit. The contributions of this study are as follows. First, this study verified that goodwill is related to stock prices even after the adoption of International Financial Reporting Standards (IFRSs). Second, it will be possible to induce rational decision-making regarding goodwill to accounting standards setters, supervisors, and users of financial information. Third, it recognized that the value of the financial market can be recognized only by providing reliable accounting information to the managers who prepare financial statements. This can lead managers to provide capital markets with more useful information. View Full-Text
Keywords: company assessment; sustainable excess profit; goodwill; financial analyses; financial reporting company assessment; sustainable excess profit; goodwill; financial analyses; financial reporting
MDPI and ACS Style

Ji, H. Financial Analyses and Corporate Evaluation on Sustainable Ability to Generate Excess Profit. Sustainability 2020, 12, 4647. https://doi.org/10.3390/su12114647

AMA Style

Ji H. Financial Analyses and Corporate Evaluation on Sustainable Ability to Generate Excess Profit. Sustainability. 2020; 12(11):4647. https://doi.org/10.3390/su12114647

Chicago/Turabian Style

Ji, Hyunmi. 2020. "Financial Analyses and Corporate Evaluation on Sustainable Ability to Generate Excess Profit" Sustainability 12, no. 11: 4647. https://doi.org/10.3390/su12114647

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