Research On The Pro-cyclical Effect And Risk Control Of Consolidation Goodwill

Since the financial crisis in 2008,mergers and acquisitions have become the main way for listed companies to maintain high growth.In the process of mergers and acquisitions,the “three highs” problem of high issue price,high price-earnings ratio and high proportion of over-raising has been exposed.It is followed that the proportion of combined goodwill in the total assets of the company is growing and the goodwill impairment loss is accrued.The large-scale emergence of goodwill in the market and the goodwill impairment of the same period are closely related to the changes in macroeconomic trends.In this context,linking goodwill to the macro economy,the study of the pro-cyclical effect and risk control of goodwill has practical significance.This paper first reviews the literature review and theoretical basis,and then descriptively analyzes the overall situation of goodwill.Through manual statistics of more than 1,000 listed company announcements,the formation of large-value goodwill of GEM listed companies from 2012 to 2017 was compiled,and a total of 530 sample data were obtained,summarizing the influencing factors that easily formed large-value goodwill,such as industry distribution,selection of evaluation methods and payment methods.At the same time,from the two aspects of the initial formation of goodwill and the fluctuation of market cycle and the consistency of goodwill impairment and market cycle,it proves that goodwill has a pro-cyclical effect.Subsequently,Liantronics was selected as the case study object,and the combination of quantitative and qualitative analysis was used to analyze the performance of the merged goodwill pro-cyclical effect from the financial statement transmission mechanism and the company's market value fluctuation.The research shows that during the economic boom period,the amount of goodwill increased rapidly,and the impairment loss of goodwill was less.At this time,the formation of goodwill contributed to the improvement of corporate performance and stimulated stock price growth.During the recession,large-value goodwill was confirmed less,the increase in impairment losses is accrued.At this time,the formation of goodwill will not boost the company,and the provision of impairment will reduce the company's profit margin and further reduce the market value of the company.The pro-cyclical evolution of goodwill has a certain impact on the measurement of goodwill itself,the operation of the company and the stability of the market.Based on the research conclusions,this paper makes recommendations to listed companies,evaluation agencies,regulatory authorities and investors: Listed companies should strengthen the risk awareness of the prosperous effect of goodwill,rationally predict when the market is high,and strengthen the risk awareness of goodwill impairment;The evaluation agency should maintain fairness and independence,and rationalize the merger and acquisition;The regulatory authorities should provide comprehensive supervision of listed companies and third-party organizations in advance and afterwards,strengthen the information disclosure system,and maintain market operation order;Investors should strengthen knowledge reserves,improve risk awareness and avoid the impact of goodwill on the investment income.However,at the same time,we must also pay attention to the positive effect of the pro-cyclical effect of goodwill,and create real excess returns for the company.The expected contribution of this paper is that,firstly,this paper links the goodwill from the macroeconomic cycle fluctuation from the economic perspective,analyzes the performance and risk of the goodwill pro-cyclical effect,and has certain certainty for listed companies to strengthen their own management and respond to market risks.Secondly,the current research on goodwill focuses more on finance,and there are few studies on this aspect.This paper provides new ideas for the study of goodwill.The shortcomings of this paper are limited disclosure of information by listed companies,possible errors in the collection of manual data,and the near occurrence of economic recession,which limits the observation of the long-term financial impact of goodwill impairment.