The Empirical Analysis Of Influencing Factors Of Goodwill: From The Perspectives Of Business Value Created

As the development of economy and the impact of increasing frequent acquisitions, the proportion of goodwill in the purchase price becomes larger, and sometimes as high as 80 percent or even more prominent in the knowledge-based economy and information era. Therefore, it is significant to solve the problems such as the recognition, measurement and accounting disposal of goodwill.This paper scrutinized the relationship between goodwill and company value as well as the continuity of company value and the relationship between net intangible assets and company value as well as continuity of company value on the listed corporate from 2001 to 2006 through descriptive statistics, regression analysis and other methods by using stock prices, return on equity, continuity of return on equity, earnings per share and continuity of earnings per share as the dependent variables, goodwill and net intangible assets as independent variables, company scale, asset-liability ratio and equity deduced by the net intangible as control variables in the first part. In the second part of goodwill influencing factors, the dependent variable is goodwill and the independent variables are net intangible assets, sale costs, the average salary of executive officers, the average salary and welfare of employers, asset-liability ratio, average interests rate, social responsibility and inventory turnover as the independent variables, total assets and total assets turnover as the control variables so as to analyze the relationship between goodwill and geographical location, effective advertisements, capable executive officers, the quality of employers, financing ability, the creditworthiness, the public and governmental relationship and the marketing capability.According to the empirical results, firstly, there is a significant positive relationship between goodwill and stock prices, return on equity, continuity of return on equity, earnings per share as well as continuity of earnings per share, which is not significantly different among various industries and shows universal meaning to all industries excluding finance and insurance. And the relationship between goodwill and stock prices, return on equity, continuity of return on equity, earnings per share as well as earnings per share is not significant. That is to say, it is more suitable to treat goodwill differently from intangible assets comparing with previous accounting disposal.Secondly, according to the empirical results of goodwill influencing factors, most of the independent variables hold significantly positive correlation with the dependent variable. The following factors have been verified, which are the advantageous location, superb sale teams, effective advertisements, the capable managers and officials, perfect management rules, qualified employers, social responsibilities, the size of the corporations. The financing level has positive effect on goodwill in certain scope but the effect may be negative when the financing level is too high.The innovations in this paper are as follows. Firstly, an empirical study on the relationship between the goodwill and corporate profitability as well as shareholder wealth has been carried out. According to the empirical results, there is positive relationship between the goodwill and the stocks price as well as other profitability variables and the results are significant.Secondly, this paper supports the accounting disposal that goodwill is distinct from intangible assets. The relationship between the net intangible and profitability of the samples are not significant, which supporting the argument that goodwill is different from intangible assets and goodwill exists in companies objectively.Thirdly, the analysis and discussion about goodwill influencing factors has been limited within the scope of theory. This paper tries to make deeper analysis of the influencing factors of goodwill from the perspective of financial reports. The data in this paper covers all industries except finance and insurance to insurance the data is universal.Some of the variables are chosen only on the base of Chinese special economic conditions and further studies may focus on making improvement on this limitation to make the research more universal.