LAUSR

The present study investigates whether ethnic diversity among firms’ directors influences the decision to take goodwill write-offs, after considering the economic factors of impairment (measured in terms of the market capitalization indicator), reporting incentives, and firms’ internal governance. The analysis focuses on energy firms in Malaysia from 2006 to 2018. The regressions results based on binary logistics show that energy firms are less likely to take goodwill write-offs even when the market indicates the possibility for the write-offs. The results also show the absence of the direct relationship between goodwill impairment decisions and ethnic diversity of the board of directors. Nevertheless, the results reveal that board ethnicity moderates the relationship between firms’ goodwill impairment decisions and the market capitalization indicator, suggesting that as firms encounter increasing market indicator of impairment losses, the board with diverse ethnicity positively influences firms in taking goodwill writeoffs. The results of the present study add to the literature on board diversity and firms’ decisions with regard to goodwill impairment by highlighting the beneficial roles of having ethnically diverse board of directors, in that they use the market indicator that goodwill may be impaired in their monitoring role on the goodwill impairment decisions. The results offer input to the policymakers by suggesting that to strengthen the monitoring roles of the board of directors, they need to be diverse and equipped with indicators that would assist them in their monitoring decisions.