Research On The Industry Peer Effect In Goodwill Impairment Of Chinese Listed Companies

Under the background of China’s industrial structure transformation,companies are paying more attention to the development mode of mergers and acquisitions.In the wave of mergers and acquisitions,the goodwill of listed companies began to accumulate rapidly.With the expansion of the scale of mergers and acquisitions,the scale of goodwill impairment of listed companies also began to grow rapidly.In recent years,there have been frequent incidents of large amount of goodwill impairment in the capital market.These incidents directly led to the deterioration of corporate performance.This situation not only seriously damages the interests of investors,but also causes a negative impact on the sound development of the capital market.In this context,the academic and practical circles have focused on the issue of goodwill impairment.At present,most researches on goodwill impairment are based on the assumption that business decisions are independent of other companies in the market.However,the business activities of a company are embedded in the social environment in which they exist.The decision of a target company is not only related to its own operating factors,but also influenced by its peer companies.As an internal financial decision led by company managers,goodwill impairment may also be affected by its peer companies.Based on the practical and academic research background above,this dissertation performs a scientific research on the industry peer effect of goodwill impairment of Chinese listed companies according to information asymmetry theory,principal-agent theory,social learning theory and deterrence theory.Specifically,this dissertation adopts the sample of Chinese A-share listed companies and in accordance with the logical sequence of "existence test--formation mechanism analysis--economic consequences study--effectiveness discussion of external supervision(annual report inquiry letter supervision)",this dissertation conducts research and exploration in four aspects:Firstly,the dissertation performs an existence test of industry peer effect of companies goodwill impairment to explore whether there is an industry peer effect in goodwill impairment decision of Chinese listed companies.And from the view of property attribute,external audit institution,environmental uncertainty,the dissertation explores the differences of goodwill impairment industry peer effect among different listed companies.Secondly,the dissertation carries out a study on formation mechanism of industry peer effect of goodwill impairment.This dissertation explores the principal-agent mechanism and competition mechanism in the formation process of the peer effect of goodwill impairment and further clarifies the imitation objects of goodwill impairment peer behavior.Thirdly,this dissertation performs a research on the economic consequences of the industry peer effect of goodwill impairment.The influence of peer effect of goodwill impairment on stock price crash risk and companies’operating performance is examined.Fourthly,from the perspective of non-punitive supervision,the supervision effect of annual inquiry letter on the industry peer effect of goodwill impairment is discussed.This dissertation analyzes the inhibitory effect of the annual report inquiry letter and its characteristics on the industry peer effect of goodwill impairment.It also examines whether there is firm heterogeneity in the governance effect of industry peer effect on the goodwill impairment from three perspectives:property attribute,listing age and companies investors’ attention.The main research conclusions of this dissertation can be summarized as follows:(1)Based on the theory of information asymmetry,taking Chinese A-share listed companies from 2012 to 2021 as study samples,this dissertation analyzes the existence of industry peer effect of companies goodwill impairment.It is found that there is an industry peer effect in goodwill impairment of Chinese A-share listed companies.After eliminating the endogeneity problems in the model and conducting robustness tests,the conclusion is still valid.Furthermore this dissertation adopts the method of grouping regression to study the difference in the industry peer effect of goodwill impairment among different listed companies from three perspectives:property attribute,external audit institution and environmental uncertainty.The research shows that:Firstly,the industry peer effect of goodwill impairment of non-state-owned listed companies is stronger than that of state-owned listed companies.Secondly,the industry peer effect of goodwill impairment of non-Big Four audit listed companies is stronger than that of Big Four audit listed companies.Thirdly,the industry peer effect of goodwill impairment of listed companies with high environmental uncertainty is stronger than that of listed companies with low environmental uncertainty.(2)The dissertation uses the theory of principal-agent and social learning theory to study the formation mechanism of industry peer effect of companies goodwill impairmentthe principal-agent mechanism and competition mechanism.The principal-agent mechanism is that company managers are motivated by self-interest motivation.They seek benefits for themselves by imitating and learning the relevant behaviors of peer companies to form peer effect.Competition mechanism including the competitive position of companies and the degree of industrial competition refers to the peer effect produced through the process when companies learn from excellent companies in the same industry in order to maintain their competitive position or improve their competitiveness.This study confirms that principal-agent mechanism and competition mechanism are the formation mechanisms of industry peer effect of goodwill impairment.The robustness test is used to ensure the robustness of the research conclusion.Besides,this dissertation also clarifies the imitation objects of the industry peer behavior of the companies goodwill impairment.This dissertation verifies whether the industry peer effect of the companies goodwill impairment follows the logic imitative law and the law of first inside outside last from two perspectives:company size and property attribute.The findings are as follows:Firstly,for the companies in the same industry,small-size listed companies will choose to imitate large-size listed companies,while large-size listed companies will choose to imitate other large-size listed companies.This proves that the industry peer effect of goodwill impairment follows the law of logical imitation.Secondly,for the companies in the same industry,non-state-owned listed companies will choose to imitate non-state-owned listed companies,while state-owned listed companies will choose to imitate state-owned listed companies.This proves that the industry peer effect of goodwill impairment follows the law of first inside outside last.(3)Based on information asymmetry theory and signal transmission theory,this dissertation takes Chinese A-share listed companies from 2012 to 2021 as research samples to study the economic consequences of industry peer effect of goodwill impairment.This dissertation argues that the impact of the peer effect of goodwill impairment on companies includes two aspects:stock price crash risk and operating performance.The research findings are as follows:Firstly,the higher the degree of industry peer effect of companies goodwill impairment is,the greater the risk of future stock price crash is.Secondly,the higher the degree of industry peer effect of companies goodwill impairment is,the worse the business performance in the future is.This hints that the industry peer effect of goodwill impairment is a "harmful" peer effect.After eliminating the endogeneity problems in the model and conducting robustness tests,the conclusion remains convincing.(4)Finally,this dissertation adopts the theory of information asymmetry and the theory of deterrence,taking Chinese A-share listed companies from 2017 to 2021 as study samples to explore the supervision effect of annual report inquiry letter of stock exchange on the industry peer degree of corporate goodwill impairment from the perspective of non-punitive supervision.It is found that the annual report inquiry letter can reduce the industry peer degree of goodwill impairment.By identifying the characteristics of the annual report inquiry letter,the study finds that the more characters and problems involved in the annual report inquiry letter,the lower the degree of industry peer effect of goodwill impairment is.After eliminating the endogeneity problems in the model and conducting robustness tests,the conclusion is still robust.In addition,this dissertation also examines the heterogeneity of the role of annual report inquiry letter in the supervision of industry peer effect of goodwill impairment.This dissertation adopts the method of grouping regression to explore from three perspectives:property attribute,listing age and companies investors’ attention.The research finds that:Firstly,the supervision effect of the annual report inquiry letter on non-state-owned listed companies is better than that of state-owned listed companies.Secondly,the supervision effect of the annual report inquiry letter on young listed companies is better than that on mature listed companies.Thirdly,the supervision effect of the annual report inquiry letter on listed companies with high investor attention is better than that of listed companies with low investor attention.The above conclusions indicate that the annual report inquiry letter as a crucial means of post-supervision on the information disclosed by listed companies has indeed played an important role in supervision.The innovations of this dissertation are as follows:(1)This dissertation expand the analysis framework of goodwill impairment.Previous studies on goodwill impairment mainly start from individual companies to analyze the influencing factors of goodwill impairment and the economic consequences brought by goodwill impairment.Most of the above studies assume that company goodwill impairment decisions are independent of the market and are not affected by external influences.However,studies have proved that company decision-making process is influenced by its peer companies.Therefore,when studying the goodwill impairment problem of listed companies,peer companies are introduced to consider the influence of peer companies on the goodwill impairment decision of target company in this dissertation.Besides,social learning theory is incorporated into the research framework to explore the industry peer effect of goodwill impairment,and the formation mechanism of industry peer effect of goodwill impairment is analyzed in combination with the theory of principal-agent,revealing the internal motivation of industry peer behavior of companies goodwill impairment.This dissertation expands the related research of goodwill impairment and gets innovation to some extent.(2)It enriches the relevant achievements of the study on the peer effect of companies.The existing researches on company peer effect mainly focus on firm investment,production and management activities,corporate financing,social responsibility and so on.Few research has extended to the financial decision like goodwill impairment.This dissertation systematically studies the industry peer effect of goodwill impairment.On the basis of existence test,the formation mechanism and economic consequences of industry peer effect of goodwill impairment are explored.Further,this dissertation studies the supervision effect of annual inquiry letter on the industry peer effect of goodwill impairment.The logical thought of "existence test--formation mechanism analysiseconomic consequence study--external supervision effectiveness discussion" is formed.It has enriched the existing research on the peer effect of companies.(3)It provides a new idea for external regulatory research on goodwill impairment and new evidence for relevant research on supervision effect of annual inquiry letter.Previous studies on external supervision of goodwill impairment were mainly conducted from the perspectives of external audit,securities analysts,media reports and institutional investors’shareholding.Starting with the non-punitive supervision of annual report inquiry letter,this dissertation explores the external supervision of goodwill impairment and make supplements to the external supervision research of goodwill impairment.With the continuous improvement of Chinese stock market regulatory regime,the stock exchange has gradually established the front-line position of capital market supervision,and the annual report inquiry letter is an important means for the exchange to supervise listed companies.Therefore,from the perspective of stock exchange regulation,this dissertation deeply analyzes the regulatory role of stock exchange annual report inquiry letters and the characteristics of annual report inquiry letters on the industry peer effect of goodwill impairment of listed companies,providing empirical evidence based on the background of the regulatory regime with Chinese characteristics for relevant research on non-punitive regulation.This dissertation has enriched the issue of the annual report inquiry letter supervision effect and expanded related research.