Shared Auditors And M&A

As an important means to enhance the competitiveness of enterprises,mergers and acquisitions has become the most important way of resource allocation to serve the national strategic development needs and the growth of the real economy.As of the end of 2017,China's M&A market involved a transaction amount of 189,923 billion RMB,and accumulated a total of 2813 M&A cases.However,behind the upsurge of mergers and acquisitions of listed companies in China,the “three highs” phenomenon of high valuation,high premium and high performance commitment is not uncommon.At the same time,scholars also find that M&A transactions may not bring positive economic consequences to enterprises.The reason is likely to be related to the information asymmetry between the two parties.The acquisition of information plays a crucial role in the M&A transaction.Information can not only affect the search,identification and value evaluation of potential target companies by the M&A company,but also affect the success or failure of the integration after the merger and acquisition.Based on this,increasing the information transfer between the two parties is regarded as an important mechanism to enhance the value creation of M&A.In view of the particularity of China's transitional economic environment,the formal system is still not perfect,and the regulatory environment is relatively loose,resulting in low information transparency in the capital market,and the information collection cost of both parties is relatively high.As a supplement to the formal system,social network has become an important way for enterprises to survive and develop.Since the financial statements of listed companies need to be audited by accounting firms according to law,accounting firms are one of the most important intermediary service organizations for understanding relevant information of enterprises.The social relationship network established by them can be used as an informal information transmission channel.Then,when the acquirer and the target party are audited by the same accounting firm,the shared auditors relationship existing between the merger and acquisition parties is a kind of external connection relationship,which can play the role of information transmission and organization coordination,reduce information asymmetry,and thus have an impact on the merger and acquisition behavior and economic consequences.In view of this,this paper attempts to answer the following questions from the perspective of shared auditors:In the target company selection stage of merger and acquisition,is the acquirer more willing to choose the company that have shared auditors relationship with itself as the target of M&A? In the price negotiation stage of M&A,can the shared auditors play a good role as the "information matchmaker" to help both sides of the merger and acquisition set reasonable prices,so as to avoid "bubble" recognition of goodwill? In the integration stage after the completion of the M&A can the shared auditors serve as a sharing platform for information and resources to help the merger and acquisition parties achieve effective integration and thus improve the performance of the M&A?This paper takes the M&A events of China's A-share listed companies from 2004 to 2017 as a research sample,systematically examines the impact of shared auditors on target company selection,goodwill and M&A performance,and explores shared auditors inhibition of M&A goodwill bubble and improve M&A value creation mechanism,and further consider the nature of the property rights of the acquirer and the adjustment of the degree of information asymmetry between the parties.The research findings in this paper are as follows:(1)Companies with a shared auditors relationship with the acquirer are more likely to become the target party.(2)The shared auditors of the M&A parties can restrain the bubble of merger and acquisition goodwill,,which not only can significantly reduce the amount of new M&A goodwill,but also significantly reduce the probability of impairment of the acquired goodwill.Even if the impairment occurs,it can effectively reduce the proportion of impairment of goodwill.In addition,shared auditors have achieved a negative impact on the merger reputation bubble by reducing information asymmetry and suppressing accrued earnings management.(3)Shared auditors between M&A parties can effectively improve M&A performance.The existence of shared auditors relationship can significantly reduce the probability of mergers and acquisitions of financial consultants,and also significantly reduce the premium level of M&A events,thus achieving a positive impact on M&A performance.(4)The nature of the property rights of the acquirer has a regulatory effect on the relationship between shared auditors and target company selection and M&A performance.(5)The degree of information asymmetry between merger and acquisition parties has a moderating effect on the relationship between shared auditors and target company selection and M&A performance.The possible innovations of this paper are as follows:(1)At present,there is less literature on the impact of external linkages between mergers and acquisitions on M&A economic consequences.This paper From a new perspective of shared auditors,systematically examines the impact of shared auditors on M&A target selection,M&A goodwill and M&A performance,clarifies the mechanism of share auditors in transfering information and reducing information asymmetry in M&A transactions,thus provides new explanation and empirical evidence for the study of the influencing factors of target company selection,M&A goodwill and M&A performance.(2)It effectively reveals the “black box” between shared auditors and M&A goodwill and M&A performance.This paper attempts to give a possible path for shared auditors to suppress the M&A goodwill bubble and improve M&A performance,and to conduct indepth research on the mechanism of the existence of the shared auditors to the M&A economic consequences.In addition,we also make study if property rights and information asymmetry can moderate the relationship.It is helpful to systematically understand the influence mechanism of social network relations such as shared auditors on M&A.(3)Expanded research literature in the field of shared auditors.Although the existing literature has proved that accounting firms will transfer information between companies,and the existence of shared auditors have a significant impact on M&A behavior and M&A consequences,but the object of shared auditors is mainly locked in listed companies and suppliers,brokers and analysts.This paper extends the impact of shared auditors on corporate behavior to the M&A area.It is helpful to supplement the domestic and foreign literature on the research vacancy of exploring the positive role of shared auditors in M&A.