Does Internal Control Affect Goodwill Impairment?

In recent years,as more and more listed companies are keen on mergers and acquisitions,the competition for target companies is increasingly fierce,and high premium has become a common phenomenon,resulting in the high goodwill of China's listed companies,which exceeds trillions of yuan.With the increase of the total amount of goodwill,the number of enterprises confirming the goodwill impairment and the total amount of loss also increased.However,the risk of goodwill impairment hidden in the huge goodwill has become a performance mine which may be detonated at any time in listed companies.Goodwill impairment will engulf profits,reduce financing capacity and increase the uncertainty of future earnings.The turbulence of company value has become a major problem affecting the stability of our capital market.Therefore,how to reduce the corporate goodwill impairment is a topic of research value.The existing literature holds that by limiting the opportunistic motivation of the management of listed companies,internal control can improve the value correlation of the goodwill impairment.Internal control has the function of risk control,which will be good for preventing the risk of goodwill impairment.There is little literature to discuss the affection of internal control to goodwill impairment or the specific influencing mechanism.Based on a sample of listed A-share Chinese companies from 2007 to 2016,this paper uses the role of internal control in advance and in process,combines the internal and external environment(management shareholding,ownership concentration,media attention)to study the relationship between internal control and goodwill impairment.This study found that internal control can significantly reduce the goodwill impairment of enterprises,which is realized by restricting the excessive M&A premium.The inhibiting effect is stronger when management shareholding is higher;but is weaker when ownership concentration is higher.There is a substituted relation between media attention and internal control.This paper opens up new perspective for the research of internal control and goodwill impairment,supplements and improves the analysis framework from the perspectives of restraining the high premium and promoting the integration ability,enriches the research literature related to the goodwill impairment.At the same time,indicating the influence of environment by exploring the moderating effect of internal and external environment on internal control.This study provides empirical evidence for listed companies to prevent the risk of goodwill impairment and to promote the sound development of M&A.