Research On Impairment Of Goodwill And Economic Consequences Of Huayi Brothers’ Merger And Acquisition

With the globalization of the global economy and the increasingly fierce competition in the capital market,in order to expand their market share and increase economies of scale,enterprises are constantly increasing mergers and acquisitions,especially in recent years,which has brought huge accumulation of goodwill.The risk of impairment of goodwill is as frightening as a sword of Damocles.In the announcement released in April 2019,Huayi Brothers pointed out that in the whole year of 2018,1.382 billion yuan of asset impairment provision will be accrued,and the net profit in 2018 will be reduced to negative value,becoming the first serious loss year since Huayi Brothers went public.This move triggered widespread discussion among minority shareholders in the market and letters from regulators.Therefore,based on the theory of goodwill impairment,this paper selects typical cases of Huayi Brothers’ merger and acquisition of Zhejiang Changsheng,Dongyang Haohan and Dongyang Meila as the research object.Firstly,it introduces the background of M&A,the basic situation of the acquirer and the acquired party,the process and motivation of M&A.Secondly,it discusses the incomplete disclosure of initial confirmation information of Huayi Brothers,the lack of identifiable net assets assessment and off-balance sheet intangible resources identification,the imperfect disclosure of goodwill impairment test information,and the insufficient provision of goodwill impairment.It also analyzes the causes of goodwill impairment of Huayi Brothers from five aspects: overestimation of asset value by income method,poor performance commitment of the acquired party,motivation of management for earnings management,high risk of media industry,and unreasonable provision of goodwill only by impairment method.Thirdly,through the event study method,this paper analyzes the stock price change caused by goodwill impairment of Huayi Brothers,and compares the financial performance and non-financial performance before and after goodwill impairment of Huayi Brothers’ merger and acquisition,trying to study its economic consequences.Finally,aiming at the problems of the case,we get some enlightenment from the perspectives of the company itself,regulators and other stakeholders.Through case analysis,this paper holds that the impairment of huge goodwill sends a signal to investors that the enterprise is not doing well,which is very unfavorable to the enterprise.From the company level,it is not conducive to individual development,and from the market level,it is not conducive to healthy operation.Enterprises should improve the gambling agreement,strengthen the internal control of the company,choose appropriate valuation methods and M&A objects,regulators should strengthen the supervision of M&A and information disclosure,improve the level of evaluation institutions,and investors should improve their own identification ability.