A Case Study Of The Effect Of Premium Mergers And Acquisitions On The Risk Of Impairment Of Goodwill

With the transformation and upgrading of China's traditional industries,the integration of emerging industry resources,the increasingly fierce industrial competition and other market changes,coupled with the loosening of related policies,M&As have become profit-increasing,effective distribution of company resources and market resources in the market,and competition an effective means to occupy a favorable position.Since the M&A price will be affected by various factors such as the characteristics of the two parties' companies,the industry policies in which they are located,the choice of valuation methods,and the management perspective,this promotes the frequent occurrence of premium M&As.Because the high goodwill generated under premium M&As deviates from the essence of goodwill,this part of goodwill will be difficult to maintain for a long time,so companies have a greater risk of goodwill impairment.The high-level echelon theory believes that senior executives are prone to overconfidence because of their high positions and advantages in information and ability.This will directly affect the important behaviors and decisions of the company,and the M&A behavior and the determination of the M&A price as a major matter of the company are of course also included.Therefore,on the basis of literature research and theory,this article takes company A's M&A of company B as the research object.From the perspective of executive overconfidence,we find that the overconfidence psychology of executives has formed huge goodwill and subsequent goodwill on premium mergers.From the perspective of executives' overconfidence,find out the mechanism by which executives ' overconfidence affects premium M&As and subsequent goodwill reduction risks,and explain the specific expression of the economic consequences of goodwill reduction risks.The results of this paper show that: from the perspective of overconfidence,premium M&As increase the risk of corporate goodwill impairment.First of all,due to excessive trust in their own vision,the accuracy of information and their own ability to control events,executives will optimistically estimate the strength of the acquired company during M&As,and high-premium mergers are more likely to occur.Secondly,overconfident executives will frequently conduct M&As,and the proportion of premium mergers will be very high,so the company's total goodwill and the proportion of goodwill in net assets will continue to increase.However,there is a part of goodwill that is out of the essence of goodwill at this time,which increases the possibility of goodwill impairment and the possible amount of goodwill impairment,which increases the risk of goodwill impairment.Finally,because the development potential of company B is far lower than expected,the factors supporting high-premium M&As can't be maintained in the company's later integration process,and the problems in the operation also make the company's benefit less than expected.At this time,the company will have goodwill impairment,which will affect the company's profit,financing ability and the interests of small and medium shareholders.