Analysis On The Causes And Economic Consequences Of Goodwill Impairment Of Listed Companies

In recent years,China's m&a market has been developing rapidly under the influence of economic policies and market environment.As an important way to optimize resource allocation in the capital market,m&a plays an important role in enterprise transformation and development.At the same time,the book goodwill of listed companies keeps accumulating,and the impairment risk of goodwill gradually becomes prominent.After the merger and acquisition boom,the performance commitment expired,the target enterprise did not meet the expectations,many listed companies due to the provision of a huge amount of goodwill impairment and resulting in losses,not only makes the enterprise operating difficulties but also bring huge losses to investors.In recent years,the wave of goodwill impairment in the capital market has aroused the high attention of the capital market on goodwill impairment.The impairment test method is the follow-up measurement method of goodwill currently adopted in China.The impairment test method of goodwill gives independent discretion on the recognition time and amount of goodwill impairment,and the impairment of goodwill becomes a tool for earnings management of listed companies.Based on the above background,this paper selected Dongfang Precision enterprises as the case study object,combined with the nature of goodwill,the subsequent measurement method of goodwill,the impact of goodwill impairment and other relevant literature,to analyze the causes of goodwill impairment and the economic consequences of goodwill impairment.Firstly,this paper analyzes the general situation of mergers and acquisitions in the capital market,the scale of goodwill and the impairment of goodwill,and analyzes the scale of goodwill and impairment of goodwill of listed companies,as well as the distribution characteristics of the industry of goodwill impairment.Then,the paper takes this as a starting point to analyze and explore the causes of goodwill impairment.By sorting out the process of goodwill formation,it is found that the valuation of the target enterprise is too high,and the initial amount of goodwill in m&a at a premium is confirmed to be inflated,which provides a large space for subsequent impairment.The policy expectation of replacing the subsequent measurement method of goodwill with the amortization method increases the motivation of the management to use the impairment of goodwill for earnings smoothing management.Affected by changes in industrypolicies,the performance of the acquirer declines.Finally,the impact of goodwill impairment on listed companies is analyzed from two aspects: financial performance and market reaction.Huge goodwill impairment has a negative impact on short-term performance of companies and harms the interests of investors in listed companies.Through the analysis of the overall impairment of goodwill of listed companies,combined with the problems in the cases,Suggestions are put forward from three perspectives.The subsequent measurement of goodwill adopts the method of amortization and impairment test.Investors strengthen the awareness of risk prevention.