Study On Goodwill And Its Super Profit-Earning Ability Of Listed Companies In China

With the globalization and diversity of the world economy, the economic ties between countries become more closely, and the M&A activities between enterprises are becoming more and more frequent. Many listed companies choose to use the M&A activities to achieve their business combinations, such as expansion of the company size, technological innovation, risk reduce, improvement of operating profit, diversified development strategies and other strategic objectives. In China, mergers and acquisitions seen as an important capital in a centralized manner, is playing an active role on China’s economic development and resources allocation. At the present stage, China’s growing enterprise merger, along with the amount of goodwill recognized is increasing day by day, which significantly affected enterprise’s financial position and operating results. As a result, the impact of the goodwill arising from the business combination-related issues is becoming increasingly highlighted. In recent years, the amount of goodwill recognized from China’s listed companies is quite large, even up to50%or more. But questions arise, is the goodwill really will get the desired yield in the future just as what our enterprises have expected? As a particular intangible resources the company owned, what is the significance to disclose goodwill in company’s financial statements? Can it really bring to the expected benefits, and reflect its extraordinary "super profit-earning ability"? This paper adopts methods of empirical research to carry out verification of the questions above, expecting to provide some empirical supports for the results of theoretical research on goodwill.The paper first describes the background and significance of the selected topic, and systemizes the existing domestic and international documents, depending on which the author expands the theoretical analysis and empirical research.In the theoretical part, the paper illustrates the connotation and essence of goodwill, and then the perspective on the essence of goodwill were systemized, and ultimately the author selected the mainstream view-over profitability resource view as a point, focusing on analyzing the links between goodwill and corporate over-profitability, then pointed out that goodwill is a special excellent resources enterprise owned, which enables enterprises have the ability to obtain excess profits. Secondly, the confirmation method of goodwill and its possible impact are analyzed. Subsequently, the article conducted a statistical analysis of goodwill of China’s listed companies, the feature of distribution industry, and the impact on companies holding goodwill or not, showing that:a growing number of listed companies began to participate in M&A activity in the past few years, and the amount of goodwill recognized also increased year by year, which is growing increasingly; As for the industry distribution, manufacturing has made the greatest contribution. By comparing the profitability of listed companies that holding and not holding goodwill, we can concluded:Profitability of listed companies who holding goodwill was significantly higher than the profitability of listed companies who not, which has made a foundation of the empirical analysis behind.And in the empirical research part, this paper selects sample data respectively from both long and short time windows, and both correlation analysis and regression analysis are made, the results showed that:in the short term, the profitability of the enterprise is not significantly affected by goodwill, probably because goodwill is not able to play its role in the short term. But in the long term, the empirical results show that:Goodwill makes significant impact on the profitability of the business, whose influence is larger than that of several other assets such as the fixed assets, and intangible assets, reflecting its "excess profits" essence. In the end, the paper summarizes the results of empirical research and points out the limitation of it, and then puts forward several policy suggestions on the problem of goodwill as well as the outlook for future research.