Auditor Independence and Analysts’ Forecast Characteristics : Proof of Impairment of Goodwill

This paper examines the association between auditor's independence and financial analysts' forecast revisions in the specific case of goodwill impairment testing. Using a sample of 1,247 firm-year observations representing 177 firms listed on the CAC All-Tradable (the former SBF 250) over the 2006-2013 period, firstly, we found significant and negative effects of individual auditors' independence (independence of Leader as well as that of the Follower auditor) on financial analysts' forecast revisions for firms that do not book goodwill impairment and exhibit lower operating performance. Secondly, we found significant and negative effects of joint auditors' independence on financial analysts' forecast revisions for both firms with lower operating performance and those who do not book goodwill impairment testing (hereafter non-impairer firms). Our results are robust regarding other proxy of financial analysts' characteristic such as accuracies. Our results conclude homogeneous effects of auditors' independence (single and joint) on financial analysts' forecast revisions for non-impairer firms with lower operating performance and their reference group. Our findings are consistent to previous studies related to auditor's independence, suggesting that auditor's independence seems to be a key factor in the resolution of agency problems and in reducing information asymmetry which leads to market efficiency