The Effect Of M&A Premium On Goodwill Impairment

According to the stipulations of Goodwill in Accounting Standard for Business Enterprises,goodwill shall be tested for impairment at least at the end of each year in order to better reflect the actual situation of goodwill.There are more and more companies with goodwill impairment provision recently,and the reason behind it is worthy of our study.At present,scholars mainly study the influence factors of goodwill impairment from the view of value destruction and earnings management.Their researches are based on the aspect of the completion of M&A transactions,reflecting the intention of provision for impairment of goodwill in the operating process.Unlike other assets,goodwill is generated by acquisitions,does the M&A premium paid by the acquirer in order to facilitate the completion of the transaction affect the impairment of goodwill?This is of great significance to study the motivation of goodwill impairment from the root.This paper selects M&A data of Shanghai and Shenzhen A-share listed companies from 2009 to 2015 as its research object,and studies the causes of goodwill impairment from the new perspective of M&A premium.First of all,this paper argues that the impact of M&A premium on goodwill impairment has a lagging effect.Taking the average of M&A premium that formed in the first two years,the previous year and the current year of impairment of goodwill occurred as its proxy variable,we examine the impact of M&A premium on the impairment of goodwill dynamically.Secondly,since share-based payment is becoming an important payment method,this paper studies the difference between M&A premium and traditional cash payment and the difference of the impact of M&A premium on goodwill impairment under these two methods.The results show that the higher the M&A premium,the greater the impairment of goodwill in the future business process;compared to cash payments,share payments generate a higher M&A premium and the relationship between the M&A premium and the goodwill impairment is more significant.The results of this paper are of great significance to enrich the motivation theory of goodwill impairment,to urge the company to reasonably confirm the degree of M&A premium to avoid the risk of late-stage goodwill,to remind investors to guard against high-premium M&A risk of goodwill impairment and to identify differences in acquisitions under different payment methods,to promote regulators to strengthen the impairment of goodwill in advance and after all-round to promote the rational and orderly development of M&A activities.At the same time,the research of this paper further supports the earnings management of goodwill impairment,that is,the provision of goodwill prepared by listed companies is more of a kind of earnings management behavior.