Research On The Relationship Between Commitment Degree Of Value Adjustment Mechanism And Goodwill Impairment

In recent years,the wave of mergers and acquisitions in capital market is becoming increasingly fierce.The value adjustment mechanism plays an important role in the major asset reorganization activities of the listed companies,for its advantages of reducing information asymmetry,protecting the interests of minority shareholders and encouraging management.However,the value adjustment mechanism will increase the risk of high premium and high valuations,this has weakened its protection against small and medium shareholders.Paying high premium and making high performance commitment compensation are voluntary actions of both sides of the mergers and acquisitions.High premium balance of mergers and acquisitions are often reflected in the goodwill subjects of consolidated statements.Goodwill is a discounted value of future expectant interests.The listed companies expect that the underlying assets in the future will have great development potential and profitability,and can bring excess profits for the enterprise,so they are willing to pay the premium that beyond the true value of the underlying asset.Under the background of long merger wave and high performance commitment,the performance completion rate of the underlying asset has become an object of concern to all parties.Once the underlying asset largely unfinished the performance commitments,that means the listed companies may face huge risk of goodwill impairment,which directly affects the profit of the company for the current year.This paper manually collected the mergers and acquisitions events of listed companies which signed the value adjustment mechanism and finally completed it during 2010 to 2016 on SME and GEM board as the research object,based on the entire performance commitment period,to study the influence of value adjustment mechanism on goodwill impairment.Firstly,to test the relationship between performance completion rate and goodwill impairment through empirical tests,the paper uses performance completion rate to measure the commitment degree of value adjustment mechanism,and employs goodwill virtual variables and continuous variables to measure goodwill impairment decision and goodwill impairment ratio respectively.Secondly,considering the decision of the goodwill impairment of listed companies may be untimely,the paper takes a further test on the relationship between value adjustment mechanism level in current period and goodwill impairment in lag one phase.Through statistical analysis and empirical test,the following conclusions are drawn,(1)there is a significant negative correlation relationship between the completion rates of value adjustment mechanism and the impairment of goodwill.That is,the lower the completion rates of value adjustment mechanism is,the greater goodwill impairment decision and goodwill impairment ratio will be.(2)After considering the untimely decision of the goodwill impairment,the significant negative correlation relationship between the completion rates of value adjustment mechanism and the impairment of goodwill is still persists.In terms of controlling variables,compared with economical factors,the impairment of goodwill is more affected by earnings management factors.It suggests that the listed companies have the incentive to smooth the earnings by delaying confirm or reducing the value of goodwill impairment.In conclusion,the theoretical significance of the study is reflected in three aspects.Firstly,the results of the study enrich the theory research of goodwill impairment motivation in theoretical aspect,emphasize that the value adjustment mechanism level has become one of the important factors of goodwill impairment.Secondly,the study further confirmed that the listed companies have the motivation to earnings management by using the way of goodwill impairment,especially for the hysteresis action of goodwill impairment.Thirdly,put forward the concept of commitment degree of value adjustment mechanism for the first time and use it for empirical testing,broaden the research perspective and empirical results finally.In the aspect of practice,the results suggest that the listed company should keep control of underlying assets during the entire performance commitment period,and pay more attention to the commitment degree of value adjustment mechanism and test the goodwill impairment in time.Also,the study reminds investors to keep a watchful eye on the risk of goodwill impairment that caused by the unfinished value adjustment mechanism.Moreover,the regulatory authorities and rule-making bodies should strengthen the supervision of impairment information disclosure.