Goodwill Impairment,Investor Attention And Stock Price Crash Risk

M & A has become an important business activity for listed companies to expand their business scope and asset scale,and enhance their competitiveness.The huge M & A scale provides an opportunity for the generation and growth of high goodwill.Taking China’s A-share market as an example,the number of A-share listed companies that generate goodwill due to M & A rose from 605 in 2007 to 2016 in 2018.However,according to the financial reports disclosed by various listed companies in 2018,many listed companies made huge losses in the fourth quarter due to the impairment of accrued goodwill when they made profits in the first three quarters.For whatever reason,the huge amount of goodwill accumulated in the M & A boom may cause the risk of goodwill impairment of listed companies,which has a great impact on the profitability of listed companies,and thus become an important factor hindering the healthy development of China’s securities market.Different from the mature markets such as American securities market,Chinese securities market is mostly small and medium-sized investors.When individual investors make investment decisions,they are often in the leading position due to impulse and irrationality,and lack of professional investment knowledge and technology,which shows the characteristics of strong speculation,frequent operation,etc.,which leads to violent shocks in Chinese stock market due to the impact of a small amount of information.M & A events are often regarded as important news to change the fundamentals of listed companies,which attract investors’ attention after the company issues the M & A announcement.However,due to the lack of in-depth understanding of the M & A behavior of listed companies and the judgment of whether M & A can improve the company’s performance,individual investors buy or sell blindly,resulting in large fluctuations in the stock price.This paper takes listed companies in Shanghai and Shenzhen Stock Exchange as the research object,selects Baidu search index data and individual stock performance data from January 1,2013 to December 31,2018,and studies the relationship among M & A goodwill of listed companies,investor concern and risk of stock price collapse,and also discusses whether the relationship among the three is different among different listed companies.From the perspective of behavioral finance,this paper puts forward the micro mechanism of the risk of stock price collapse caused by goodwill,which provides a new perspective for the study of the risk of stock price collapse,and has a certain inspiration for the construction of multi-level capital market in China.This paper draws the following conclusions through empirical research:(1)The listed companies’ M & A goodwill will aggravate the risk of stock price collapse,and the higher the amount of goodwill,the greater the risk of stock price collapse,especially in the GEM market.M & A behavior of listed companies often sends signals of growth to the market,causing stock prices to rise and stock price bubbles to accumulate.However,if the company fails to fulfill the performance commitment or poor management after the lock period expires,it will face high goodwill impairment loss,which will greatly impact the financial data of listed companies,hit investor confidence,cause the stock price to fall sharply,or even cause the stock price to crash.Most of the GEM are technology-based companies,which have the characteristics of high-tech and asset light.Compared with the main board market,the probability of the failure of M & A performance commitment is relatively higher.Therefore,the positive correlation between goodwill and the risk of stock price collapse is more significant in GEM market.(2)Investors’ attention will strengthen the positive correlation between the goodwill of listed companies and the risk of stock price collapse,and it is more significant in GEM companies.China’s securities market is still in the development stage,different from the United States and other mature market institutional investors,the proportion of individual investors in China’s market is higher than 80%,while individual investors often lack professional investment judgment,relying on news and other investors’ comments to make investment decisions.If there is adverse information or speech to the company in the market,individual investors may take selling behavior without professional analysis,so investors’ attention to enhance the impact of goodwill on the risk of stock price collapse.Further,after a comparative analysis of the main board market and the GEM market,it is found that the risk of stock price collapse is more significant after the GEM companies that generate M & A goodwill are paid more attention by investors.This is because the GEM companies are less followed by institutional investors than the main board companies,and the proportion of individual investors in the GEM market is higher,so the stock price is more affected by investors’ attention.Finally,this paper puts forward suggestions on how to reduce the risk of stock price collapse from four perspectives: the regulatory level,the accounting standard setting department,listed companies and individual investors.