Research On Goodwill Impairment And Economic Consequences Of Mergers And Acquisitions Of Listed Companies

Driven by domestic industrial restructuring and capital market reform,the number and size of mergers and acquisitions by A-share listed companies are continually growing.The huge premium paid by listed companies in merger and acquisition business forms high goodwill,which carries the risk of subsequent goodwill impairment.In recent years,there have been frequent cases of goodwill impairment of listed companies,leading to bad corporate performance and stock price fluctuations and brought a huge impact on the capital market and investors.Based on the background above,there is still a lot of room for research and discussion in goodwill impairment.This paper selects Quantong Education’s merger and acquisition of Beijing Jijiao Network and Xi an Xi yue cases to launch out the research.Based on sorting out relevant research literature and theoretical knowledge of goodwill and goodwill impairment,this paper uses the case study method and event study method to analyse the case.First,the basic situation of the merger case will be introduced.Secondly,studied the problems of inappropriatet impairment amount,late impairment,the division of assets group,lack of objectivity in estimating the asset group split and recoverable amount,and insufficient information disclosure.Thirdly,the reasons for goodwill impairment will be analyzed from such aspects as unreasonable premium merger and acquisition resulting in fail to meet expectations of high goodwill and target company’s performance and the motivation of earnings management.Fourthly,this paper uses the event study method to analyze the stock price changes caused by the goodwill impairment of Quantong Education and studies its economic consequences from the financial performance and non-financial performance.Finally,this paper will come up with corresponding suggestions to the company level,supervision level,and other stakeholders’ level.Through the analysis of the case,the unreasonable premium paid during the merger and acquisition makes the initial recognition of goodwill artificially high and the performance of the target company fails to meet the expectation after merger and acquisition,and then causes goodwill impairment crisis.Quantong education provision of huge goodwill impairment caused irreparable loss to the company’s performance.Based on the above findings,this paper argues that the initial recognition of goodwill should be standardised and the goodwill impairment test method should be improved in subsequent measurement;the supervisory departments should strengthen the supervision and the information disclosure of corporate goodwill;appraisal agencies need to improve their expertise,while investors need to improve their own discernment.