Research On The Causes And Economic Consequences Of Excess Goodwill And Its Impairment In Corporate Mergers And Acquisitions

In recent years,mergers and acquisitions activities between Chinese enterprises have been increasing year by year in terms of number and scale,which has brought about the formation of excess goodwill and the generation of huge impairment of goodwill.A series of goodwill impairment events have caused huge fluctuations in the capital market,making goodwill the focus of attention for all parties.On the basis of this,this thesis analyzes the case of Fulin Precisions M&A of Shenghua Technology by combining information asymmetry theory,principal-agent theory,enterprise valuation theory,and synergy effect theory,analyzes the whole process from the formation of excess goodwill to goodwill impairment,studies the causes of its formation,and studies the economic consequences of goodwill impairment from multiple perspectives,and provides relevant suggestions for goodwill impairment prevention on this basis.Therefore,it is particularly important to study the impairment of excess goodwill in the context of large-scale corporate high-priced mergers and acquisitions.Through the research,it is found that there are two important reasons for the formation of excess goodwill.One is that the evaluation of evaluation indicators is unreasonable when the evaluation agency uses the income method to evaluate the enterprise value;the other is the excessive performance commitment due to information asymmetry.Once the excess goodwill is formed,it will lay a huge hidden danger for the impairment of goodwill in the later stage.In addition,there were some problems in the operation of Shenghua Technology in the later stage of the merger,such as the adjustment of industrial policies,the crisis of the major customer Waterma,the high proportion of accounts receivable in the operating income,and the weakening of the integration effect by focusing on short-term performance after the merger,all of which were important reasons for the large impairment of goodwill of Fulin Precision.At the same time,based on Fulin Precisions financial data from 2015 to 2019,it analyzes the economic consequences of goodwill impairment to companies,including short-term market reactions and changes in financial performance.First of all,in terms of shortterm market reaction,the impairment of goodwill has caused investors to be generally not optimistic about the company,resulting in a short-term decline in stock prices.Secondly,in terms of financial performance,the impairment of goodwill will change the capital structure of the company and reduce the companys solvency;due to the outbreak of the Waterma crisis,the companys inventory turnover capacity has dropped sharply,and the accounts receivable turnover rate has dropped,resulting in operating capacity has declined;net profit has changed from positive to negative,which has also affected profitability;the growth rate of total assets has dropped by more than ten times in three years,indicating that the development ability of the company has been greatly weakened by the impact of goodwill impairment.Finally,in view of the problems existing in the merger and acquisition of Fulin Precision,some suggestions are put forward to prevent the risk of enterprise impairment.The first is to look at the subsidy policy rationally,focus on corporate technology research and development,cultivate core competitiveness,and avoid policy risks;the second is to be alert to the high-performance commitment of the acquired party,rationally look at the appraisal price provided by the appraisal agency,and rationally confirm the goodwill;the third is to strengthen the company customer expansion and improve business integration after mergers and acquisitions.