Defence of Thesis in Accounting, Tomi Vuolteenaho, M.Sc

The doctoral dissertation of Tomi Vuolteenaho's, M.Sc “Studies on goodwill impairments and loan covenants” will be publicly examined at the Aalto University School of Business on Friday, March 13, 2026.

The public defense will be held at the Aalto University, Undercraduate Center, Otakaari 1, lecture hall Y203a B-hall, 12.

Opponent: Professor Annelies Renders (BI Norwegian Business School)

Custos (Chairperson): Professor Seppo Ikäheimo (Aalto University School of Business)  

The dissertation investigates the relations between accounting information and capital markets, contributing to the research literature in financial accounting. The results are also of interest to investors, preparers of financial reports, and accounting regulators. The thesis consists of three research papers and an introduction. The empirical parts of all three studies comprise quantitative analyses of U.S. data.

The first essay investigates the timeliness and predictability of accounting goodwill impairments. Goodwill makes a substantial part of many firms’ assets and an impairment of goodwill may have a drastic effect on firm financials and stock prices. This study examines how share prices are associated with future accounting goodwill impairments among the majority of cases where the firms’ market value of equity is greater than its book value. The results suggest that stock markets are able to anticipate only the goodwill impairments that are recorded for the next fourth fiscal quarter. These impairments, therefore, are less timely than impairments recorded for the first three quarters.

The second essay investigates how expectations of accounting goodwill impairments affect the design of loan contracts. Most corporate private credit agreements include financial covenants that define covenant metrics based on accounting values and set them threshold values that legally bind the borrowing firm. Since covenant violations are costly to both borrowers and lenders, I argue that they deliberately try to avoid using such covenants that could be violated by expected bookings of goodwill impairments. Focusing on the use of net worth and tangible net worth covenants, I find empirical support for this argument. The conclusion is that the contracting parties are able to anticipate borrowers’ accounting goodwill impairments and that these expectations affect the choice of financial covenants in the loan contracts.

The third essay documents how violations of financial covenants affect corporate financing and investment behavior. On the investment side, capital expenditures decline but the use of operating leases is not affected, resulting in an increased proportion of operating leases as a means of acquiring tangible fixed assets. On the financing side, firms increase cash holdings and net debt distributions while modestly reducing equity distributions, corresponding to a net increase in free cash flow.

Further information:  

Tomi Vuolteenaho
Email: tomi.vuolteenaho@aalto.fi

Link to the doctoral thesis: https://aaltodoc.aalto.fi/doc_public/eonly/riiputus/