Enterprise Internal Control Quality And Goodwill Impairment

The report to the 19 th national congress of the communist party of China(CPC)pointed out that we must resolutely fight three major battles to complete the building of a moderately prosperous society in all respects."Preventing and defusing major risks" is one of the most important battles.It is important to "keep the bottom line of preventing systemic financial risks".In recent years,more and more enterprises are keen on the expansion of mergers and acquisitions,which has generated a huge amount of goodwill.The potential large-scale impairment of goodwill has become one of the important financial risks,which has attracted the attention of all parties.Many scholars have studied the factors that affect goodwill impairment.Internal factors include corporate growth,earnings management,corporate governance mechanisms,managerial characteristics and so on.External factors include economic environment,policy expectations,legal supervision,audit institutions,etc.There are relatively few studies on the influence of internal control quality on goodwill impairment.Existing research suggests that internal control can constrain managers' opportunistic behavior,curb corporate earnings management,and improve the reliability of goodwill impairment information.An important reason of goodwill impairment is the insufficient prevention and control of merger and acquisition risks.The core of an enterprise's internal control is risk management,and the important purpose is risk control.It can help enterprises to reasonably arrange activities and standardize procedures.It can enable the enterprises to obtain internal and external information,evaluate risks and benefits,and standardize corporate decision-making behaviors.In this paper,the impact of internal control quality on goodwill impairment is comprehensively considered from the perspectives of pre-prevention and post-control.On the one hand,by alleviating information asymmetry and agency costs,suppressing high-premium mergers and acquisitions,and reducing high-quality goodwill,the risk of goodwill impairment is reduced from the root;in this process,high-quality goodwill plays a mediating role.On the other hand,through the integration of merger and acquisition resources,it can improve the operating performance and reduce the risk of goodwill impairment.This paper further introduces the degree of marketization and media attention as moderating variables to explore the influence of them on the relationship between the internal control quality and goodwill impairment.Taking the data of Chinese listed enterprises as samples,this paper empirically tests the influence of internal control quality on goodwill impairment,as well as the moderating effect of marketization degree and media attention.The empirical results show that the quality of internal control has a restraining effect on the impairment of goodwill;in this process,high-quality goodwill plays a mediating role.The empirical study also finds that compared with regions with low marketization degree,the internal control quality of enterprises in regions with high marketization degree has a more obvious inhibitory effect on goodwill impairment.This is because mergers and acquisitions are more frequent in regions with a high degree of marketization and internal control has more room to play.Moreover,the favorable transaction environment in regions with a high degree of marketization is more conducive to M&A integration of enterprises.External media attention can inhibit opportunism behaviors of the managers,ease the information asymmetry,and standardize corporate decision-making behaviors to suppress high-premium mergers and acquisitions,improve M&A performance.However,the moderating effect of media attention on the relationship between internal control quality and goodwill impairment has not been verified and needs further study.At present,the status quo of Chinese listed enterprises holding high amounts of goodwill and accruing goodwill impairment cannot be ignored.Preventing huge amounts of goodwill impairment is of great significance for maintaining the stable operation of the capital market and preventing systemic financial risks.This paper affirms the importance of enterprise internal control,shows that the quality of enterprise internal control plays a different role under different marketization degree.This paper provides empirical evidence for the status of listed enterprises' goodwill impairment and inspiration for enterprises to improve the internal control quality.