Short Selling Mechanism And Goodwill Impairment

Since 2014,with the lowering of the threshold,A-share listed companies have set off a wave of mergers and acquisitions.Listed companies are increasingly inclined to expand the scope of the company's business and expand the scale of the company by means of extensional mergers and acquisitions.In 2015,the Central Economic Work Conference clearly pointed out that "more mergers and acquisitions,less bankruptcy and liquidation".In the same year,the number of mergers and acquisitions of listed companies exceeded 10,000.Goodwill comes from the M&A process and is the product of a premium M&A.At the same time,the book value of goodwill has erupted.And behind the goodwill bubble lies a large number of goodwill impairment risks which cannot be ignored.The provision for impairment of goodwill will devour the profits of listed companies,reduce financing capacity,and bring greater uncertainty to the future performance of listed companies,increase the risk of stock price collapse and affect financial market stability.At present,most of the existing literature on goodwill impairment research is mostly limited to the causes and economic consequences of goodwill impairment.Few literature discusses the methods of inhibiting goodwill impairment under the background of new goodwill measurement standards.Based on previous studies,the agency conflicts and information asymmetry problems existing in the company may lead to improper merger decisions and excess goodwill,and the lack of effective integration of the merger subject to achieve the expected performance,resulting in goodwill impairment,and goodwill impairment motivated by earnings management.Many previous studies have confirmed the positive and significant governance effect of the short selling mechanism,and mainly from the issue of the company's principal-agent problem,based on the theory of behavioral finance,analyze the role of information intermediary and price discovery function of short selling mechanism in the supervision and restriction of corporate princip al-agent problem.Therefore,this paper mainly explores the impact of short selling mechanism as an important external governance mechanism on goodwill impairment.Since the short selling mechanism already exists in European and American countries,the changes on this basis are relatively small,and the process from scratch cannot be observed.Research conducted in this context makes it difficult to examine the impact of short-selling mechanisms.At the same time,the endogenous problems in it inevitably affect the reliability of the research conclusions,that is,there may be factors that have not been observed,which also affects the company's short-selling and the company's goodwill impairment.In this way,the relationship between short selling and the impairment of the company's goodwill is only quantitative,not causal.Thus,this article uses the short-selling deregulation policy in the Chinese stock market as a quasi-natural experiment to overcome endogenous problems.China's stock market began trial financing and margin trading from March 31,2010,allowing eligible investors to borrow securities from brokerage firms and sell them.China's gradual deregulation of short selling is a process of multiple shocks,with a list of pilot companies designated in batches.Therefore,this paper mainly adopts the double difference method designed for the quasi-natural experimental scenario formed by split-level events,i.e.,the Time-varying DID model,to estimate the causal relationship between the deregulation of short selling and the impairment goodwill impairment.Since the event happened in staggered layers,the same company can be used as either a processing group or a control group in different periods.This paper takes 2007-2018 A-share non-financial listed companies as a sample,and empirically tests the impact of margin trading system on the goodwill impairment in advance and afterwards.It is found that the short selling mechanism can restrain the source of goodwill impairment: improper decision-making of M&A results in excess goodwill and reduce the lack of effective integration of merged entities after mergers and acquisitions.And based on the theory of information asymmetry and principal-agent theory,it is found through channel test that the inhibition effect of short selling mechanism on goodwill impairment is more significant when the degree of information asymmetry is higher or the agency cost is higher.Further studies found that the deregulation of short selling inhibited the subsequent impairment of goodwill in merger and acquisition decisions,which was more significant in enterprises with strong competitive advantages,but not significantly different in regions with different degrees of marketization.Margin and short selling system as an important mechanism innovation in the secondary stock market,the research findings of this paper provide theoretical guidance and evidence support for us to better understand the relationship between the capital market and the real economy.