A Study On The Wealth Effect Of Consolidated Goodwill For Chinese Listed Companies

Along with the continuous development of science and technology, economic globalization and diversification in the world, economic links among different countries are getting closer and closer, various mergers and acquisitions(M&A) activity between enterprises are happening more and more frequently. Many listed companies choose M&A to achieve their strategic goals of scale expansion, costs reduction, risk reduction, operating margins increase and competitive advantage. More and more merger matters occurred in our country,consolidated goodwill also accounts for a large proportion of the numerous M&A activities among listed companies, many even reached 50%. Thus we can propose several issues to undertake a study — what is the significance of separation of goodwill and intangible assets on earth, how about the goodwill’s relation with company excess profitability and company market value,if goodwill can bring wealth effect for the company.Combining the methods of normative research and empirical research,this paper research the wealth effect of the goodwill from the two aspects of the company’s excess profit ability and the market value of the company. First, this paper elaborated the background and significance of the research, the content, methods and innovation of the research, and thereby launched the theoretical research and empirical analysis. At first, theoretical study section explained the connotation of goodwill, then organized ideas on the nature of goodwill and systematically analyze the existing domestic and international research literature. Subsequently, the thesis conducted a statistical analysis about the overall situation of consolidation goodwill for Chinese listed companies presented and the characteristics of the distribution industry. The analysis shows:in China,there are more and more listed companies involved in M&A activities and the goodwill amount recognized by M&A is also growing faster and faster year by year;judging from the industry distribution of merger goodwill presentation, manufacturing sector is the largest industry in terms of both quantity and amount among Chinese listed companies which have recognized goodwill in their financial statements. Empirical research, based on the previous theoretical analysis, conducted its study from the aspects of goodwill’s relation with company excess profitability and its relation with company market value. In empirical research part, the article selected a valid sample data, carried out descriptive analysis, correlation analysis and regression analysis about the impact of goodwill to excess profits of the enterprise respectively by both long and short two time windows. The results indicated that:in short term, the profits of enterprise is not much affected by goodwill, probably because the effect hasn’t been revealed in short time. The long-term empirical results showed that consolidation goodwill has greater impact on the profitability of company, goodwill and corporate profitability significantly positively correlated. In the empirical research section on goodwill and company’s market value, this paper selected effective sample data to study their value correlation and found:the market value of company showed a positive correlation with goodwill, indicating that goodwill which enables enterprises have excess profitability determines the value of the company to some extent. At last, the paper analyzed and summarized the results of empirical research, raised a few policy recommendations about how company deals goodwill issues and expounded the outlook for future research.