GOODWILL AND REPUTATIONAL RISK: AN EXPLORATORY COMPARISON OF THREE KAZAKHSTANI PUBLIC COMPANIES

Abstract. This article examines whether reported goodwill can be used as a supplementary indicator when discussing reputational risk in Kazakhstani public companies. Goodwill is not a direct measure of reputation: under IFRS 3, it is recognised in a business combination and represents the residual after the identifiable net assets acquired are measured. The study applies an exploratory cross-sectional comparison to three issuers—JSC NC KazMunayGas, Halyk Bank of Kazakhstan JSC, and Kazakhtelecom JSC—using the 2023 figures reproduced in the initial dataset. The goodwill-to-market-capitalisation ratio is calculated for each company, and the Pearson correlation between the two absolute indicators is recalculated. The ratios are approximately 1.43 %, 0.16 %, and 37.46 %, respectively. Using the stated figures, the Pearson coefficient is approximately −0.04 rather than +0.58, indicating virtually no linear association in this three-company sample. The results therefore do not support a claim that higher goodwill is associated with higher market capitalisation. The article’s contribution is a cautious application of an accounting indicator to reputational-risk discussion and an explicit explanation of its measurement limits. The small, cross-industry sample and the need to verify market-capitalisation inputs limit generalisation.

Keywords: goodwill; reputational risk; market capitalisation; IFRS 3; intangible assets; Kazakhstan; corporate governance.

Introduction

Corporate reputation can influence stakeholder confidence, access to finance, customer relationships, and the perceived resilience of a company. Yet reputation is multidimensional and cannot be read directly from a single accounting line. For public companies, market indicators may reflect investors’ expectations about both tangible resources and less observable factors, including customer relationships, organisational capabilities, and confidence in management.

Goodwill is sometimes treated as a proxy for reputational capital. This interpretation requires caution. IFRS 3 defines goodwill within the accounting for a business combination; it is recognised as a residual after the acquisition-related amounts are measured [1]. It may reflect expected synergies and other benefits that do not qualify for separate recognition, and it is not equivalent to a standalone valuation of corporate reputation. Internally generated goodwill is not recognised as an asset under IFRS [3].

The research question is therefore deliberately limited: what do goodwill balances and goodwill-to-market-capitalisation ratios show for three selected Kazakhstani public companies, and how far can these figures support discussion of reputational risk? The aim is to assess the usefulness and limitations of goodwill as a supplementary accounting indicator, rather than to claim that it measures reputation directly.

Research contribution

The practical contribution is a transparent, reproducible comparison of three issuers and a distinction between an accounting measure and the broader construct of reputation. The analysis also demonstrates why a correlation calculated from a very small, heterogeneous sample should be interpreted as exploratory evidence only. The study does not establish causation or identify reputational-risk events.

Theoretical background

IFRS 3 requires goodwill to be recognised in the context of a business combination and provides the basis for its measurement and disclosure [1]. The balance may incorporate expected economic benefits that are not separately identifiable at the acquisition date, but it can also be affected by acquisition price, the composition of identifiable net assets and liabilities, and acquisition-specific assumptions. Consequently, companies with similar reputational standing may report different goodwill balances, while a company with a strong reputation may report no goodwill if it has not acquired a business.

Goodwill is also subject to impairment testing under IAS 36. The recoverable amount of goodwill acquired in a business combination must be assessed annually, and impairment losses may affect reported balances [2]. These accounting features mean that the amount of goodwill depends on acquisition history and subsequent impairment assessments as well as on expectations about future benefits. For this reason, goodwill should be treated as a contextual indicator, not a direct measure or standalone warning signal of reputational risk.

Data and methodology

The analysis uses three companies listed in the initial manuscript: JSC NC KazMunayGas (KMG), Halyk Bank of Kazakhstan JSC (HSBK), and Kazakhtelecom JSC (KZTK). The reporting period is 2023. The goodwill and market-capitalisation values below are reproduced from the submitted draft and must be checked against the relevant audited consolidated financial statements and official exchange data before submission. The figures are presented in million Kazakhstani tenge (KZT).

Two calculations are used. First, the goodwill-to-market-capitalisation ratio is calculated as:

GMRᵢ = (Goodwillᵢ / Market capitalisationᵢ) × 100 %.

Second, the Pearson correlation coefficient is calculated between the three companies’ absolute goodwill balances and market capitalisations. Given n = 3 and the cross-industry nature of the sample, this coefficient is descriptive only. It cannot support statistically robust inference or causal conclusions.

Results

Table 1.

Goodwill and market capitalisation of selected companies, 2023

Kazakhtelecom has the highest ratio in the sample, at approximately 37.46 %. The corresponding ratios for KazMunayGas and Halyk Bank are approximately 1.43 % and 0.16 %. This difference indicates that goodwill represents a substantially larger proportion of the reported market capitalisation for Kazakhtelecom in the selected data. It does not, by itself, demonstrate that the company faces higher reputational risk: the ratio may also reflect acquisition history, the scale of market capitalisation, accounting judgements, and sector-specific conditions.

Recalculation of the Pearson coefficient from the absolute goodwill and market-capitalisation values in Table 1 produces r ≈ −0.04. The value differs from the positive coefficient reported in the initial draft. The discrepancy is material and should be corrected in any version submitted for review. With only three observations, the coefficient is highly sensitive to individual companies and should not be generalised to Kazakhstani issuers as a whole.

Discussion

The comparison suggests that goodwill can help identify differences in the accounting profile of selected companies, but it is insufficient as a standalone measure of reputation or reputational risk. A high goodwill-to-capitalisation ratio may justify further examination of the acquisitions that generated the balance, the assumptions used in impairment testing, and the company’s exposure to reputational events. It should not be interpreted as evidence that reputation accounts for the same percentage of market value.

The results also show why absolute goodwill and the goodwill-to-market-capitalisation ratio answer different questions. Absolute goodwill is affected by company size and acquisition history, whereas the ratio expresses the balance relative to market capitalisation. Neither measure isolates reputation from other drivers of valuation. A stronger research design would combine a longer time series with observable reputation-related events or indicators, such as controversy records, customer complaints, disclosure quality, or changes in investor sentiment, and control for company size, profitability, leverage, and sector.

The present study has three principal limitations: the sample contains only three companies; the companies operate in different sectors; and the figures require verification against primary sources using consistent dates and definitions. These limitations restrict the findings to an exploratory comparison. The study does not test whether reputational risk causes changes in goodwill or market value.

Conclusion

This article examined goodwill as a possible supplementary indicator in the discussion of reputational risk for three Kazakhstani public companies. Based on the figures reproduced in the initial manuscript, the goodwill-to-market-capitalisation ratios are 1.43 % for KazMunayGas, 0.16 % for Halyk Bank, and 37.46 % for Kazakhtelecom. The recalculated Pearson coefficient between goodwill and market capitalisation is approximately −0.04, which does not indicate a meaningful linear association in this sample.

The main conclusion is methodological: goodwill can provide useful context, but it should not be equated with corporate reputation or used alone to assess reputational risk. The contribution of this exploratory comparison lies in identifying the limits of the indicator and the need to combine accounting information with direct evidence about stakeholder perceptions and reputational events. Further research should use a larger sample, several reporting years, verified market data, and additional financial and non-financial variables.