Goodwill Impairment And Economic Consequences Of Great Wall Animation’s High Premium Merger And Acquisition

With the development of China’s economy,the capital market is becoming more and more active.With the improvement of the level of technology and information technology,the construction of Digital China is beginning to emerge.People put forward new requirements for spiritual and cultural life,and the structure of cultural consumption is significantly upgraded.At the same time,the country is still in the stage of cultural system reform.In order to accelerate the transformation of economic structure,a large number of favorable policies have been issued.With the support of these policies,some traditional manufacturing industries have targeted the direction of transformation and upgrading to the cultural media industry,and the cultural media industry has ushered in good opportunities for development.The traditional manufacturing industry tends to adopt the extensional merger and acquisition development path to obtain new technology and new resources,and strive to form a diversified business model and increase economic benefits.However,the phenomenon of "high valuation,high premium and high performance commitment" occurs frequently in mergers and acquisitions,and large goodwill impairment events occur frequently.The cultural media industry as a whole shows that mergers and acquisitions must generate large goodwill,and large goodwill must be withdrawn in the subsequent trend of large impairment.It is not difficult to find that in the recent two years,the "thunder" of goodwill impairment in A-share market continues to occur,and enterprises try to whiten the fact that their performance is not up to standard through goodwill.However,large goodwill impairment instead causes the decline of the company’s stock price,which further impacts the market and exacerbates the decline of corporate performance.Under the influence of COVID-19 in 2020,in order to accelerate the recovery of market vitality,the state has issued A series of policies to encourage mergers and acquisitions.It can be predicted that the A-share market is about to embrace A new round of mergers and acquisitions,and the overall performance of the culture and media industry will rise in response to this shareholder trend.In view of this,this paper analyzes and studies the goodwill impairment and its economic consequences based on the typical case of Great Wall Animation.Firstly,literature analysis was adopted to collect relevant data and literature,which laid a theoretical foundation for subsequent research.The literature at home and abroad on motivation of high premium merger and acquisition,goodwill impairment and economic consequences of high premium goodwill impairment were summarized,and the concepts of high premium merger and acquisition,goodwill and goodwill impairment were defined.Secondly,through case analysis,the process of Great Wall Animation’s acquisition of other eight animation and game companies is elaborated and analyzed in detail.The goodwill data is processed to show the specific situation of Great Wall Animation’s large goodwill and large goodwill impairment.Analyze the motivation of high premium merger and acquisition and the influence factors of large goodwill impairment in traditional manufacturing industry when the business development is difficult.Thirdly,the goodwill impairment event is divided into two stages before and after the impairment,and the impact of goodwill impairment on enterprise performance and market is studied through event study method,financial index analysis method and economic value added method.The conclusion is that the high premium of merger and acquisition is the internal cause of goodwill impairment of Great Wall Animation;Great Wall Animation subsidiary’s failure to meet the performance commitment leads to impairment of goodwill in subsequent measurement;The goodwill impairment of Great Wall Animation has the motive of earnings management;The provision of large goodwill impairment will send out adverse signals in the market,resulting in a negative market reaction,and then affect the company’s ability to continue operating.Finally,some suggestions are put forward.Listed companies should reasonably control the M&A premium,reasonably evaluate the value of the target enterprise,and improve their M&A negotiation ability.Optimize transaction design before merger and acquisition,pay attention to the integration of resources after merger;Optimize the goodwill management of Great Wall Animation,enhance the awareness of risk prevention,and establish the internal control system of enterprises;Strengthen goodwill information disclosure,establish a rating mechanism for goodwill information disclosure,and strengthen the supervision of information disclosure.