Research On The Causes And Economic Consequences Of Wanda Film Goodwill Impairment

With the development of the capital market,many listed companies have carried out a series of mergers and acquisitions in order to expand their market share to enhance their competitiveness.Along with the increase in merger and acquisition activities,high premium mergers and acquisitions have also brought about a large amount of goodwill.As part of a company’s total assets,goodwill accounts for an increasingly high proportion of total assets.Any subsequent impairment of goodwill in the event of deteriorating business conditions will have a serious impact on the Company.With the strong national support for the film and television industry in recent years,there has been an influx of capital into the industry,resulting in frequent mergers and acquisitions.In order to achieve synergies,many listed companies in the film and television industry have promoted their companies through outbound M&A,and goodwill in the industry has increased.However,high premium M&A activities do not bring the company corresponding excess profits,but instead expose the company to the risk of goodwill impairment,which is like a sword hanging over the heads of listed companies.With the expiry of the M&A performance commitment period,the issue of goodwill has also erupted one after another,becoming the focus of the SFC’s attention.Against this backdrop,this paper selects Wanda Film,which has recorded goodwill impairment for two consecutive years,as the subject of study.Firstly,the relevant literature and theories on goodwill impairment are sorted out to provide a theoretical basis for the study of this paper.Secondly,a brief introduction to both sides of the merger and acquisition is given to sort out the motivation of Wanda Film’s M&A.It is found that the company seeks M&A in order to diversify its development and improve the layout of its industrial chain;to achieve complementary resources and improve efficiency.This is followed by an analysis of the goodwill formation process and impairment.The study then analyses the causes of goodwill impairment from five different perspectives.The study finds that a large amount of goodwill was accumulated at the time of the M&A at an excessive premium;the slow development of the industry and increased competition made the company fail to complete its performance commitments in a timely manner,resulting in a decline in the company’s profits and thus triggering pressure for goodwill impairment;the poor synergy effect of companies after the M&A and failure to meet performance commitments also lead to goodwill impairment;the analysis also finds that managers The analysis also revealed the existence of surplus management practices.Finally,the economic results are analysed in terms of the financial position,the company’s share price,the impact of different subsequent measurements of goodwill,and the impact on the interests of minority shareholders,and the impact of goodwill impairment on the share price of Wanda Film is analysed using the event study method.The study concludes that the impairment of goodwill has resulted in little change in short-term solvency and a decrease in long-term solvency,and that the impairment of goodwill has also weakened Wanda Film’s profitability,operating capacity and development capability to a certain extent;secondly,the impairment of goodwill will also lead to a decline in share price in the short term;different subsequent measurement methods will also have different impacts on profits;and the provision of goodwill impairment will also harm the interests of minority shareholders.In response to the above findings,this paper draws the following insights.Firstly,the measurement method of goodwill should be standardised and a more reasonable method should be chosen for the subsequent measurement of goodwill,and a reasonable valuation method should also be chosen in the case of mergers and acquisitions;secondly,regulatory efforts should be strengthened and the key information disclosure mechanism should be improved;and finally,reasonable performance commitment targets should be set.