The Effect Of Earnings Management In The Pre-acquisition And Post-acquisition On Goodwill Impairment

Since 2013,the number of merger and acquisition of Chinese has increased sharply.The amount of goodwill rises with the day.The risk of goodwill impairment has been exposed in the 2015 annual report.According to the basic situation of goodwill impairment,this paper puts forward the research problem that earnings management before and after the merger and acquisition affects goodwill impairment.There is difference from the existing literature which this paper uses the research method of empirical research instead of the research method of case study.Through the empirical data of listed companies from 2010 to 2016 which have goodwill impairment,this paper studies the effect of earnings management on the impairment of goodwill.According to the time of mergers and acquisitions completed,this paper divides earnings management in two parts:the earnings managements in the pre-acquisition and earnings management in the post-acquisition.Before acquisition,the accrual earnings management of acquiring firm is related to the higher degree of goodwill impairment.After acquisition,the accrual earnings management is positively correlated with the degree of impairment of goodwill.This paper uses the model of Jones(1995)to measure the degree of accrual earnings management.Through this empirical study,this paper can draw a conclusion that the accrual earnings management of acquiring firm before acquisition is related to the higher degree of goodwill impairment.Then further study is that the choice of share-based payment makes the relationship between earnings management and impairment of goodwill more significant.Through the empirical research,this paper can also draw a conclusion that the accrual earnings management is positively correlated with the degree of impairment of goodwill.Then further study is that the choice of "non-big-four" makes the relationship between earnings management and impairment of goodwill more significant.Finally,the further study is that the scale of firm makes the relationship between earnings management and impairment of goodwill more significant.In theory,the theoretical system of goodwill is not perfect and unified.I hope this paper can through the empirical analysis of the impact of earnings management on the impairment of goodwill,to enrich the theoretical system of goodwill impairment and earnings management.And this paper can compensate for the lack of the research methods of goodwill impairment.In reality,I hope this paper can identify the choice of share-based payment and the scale of firm make the relationship between earnings management and impairment of goodwill more significant.And this paper can identify whether the big four and the increase of firm size can effectively reduce the impact of earnings management on the goodwill impairment.