Research On Goodwill Impairment And Its Economic Consequences Of Huace Film & Television Merger

The "goodwill impairment wave" in 2018 marked a major reform of the capital market.Many listed companies suffered a significant decline in performance and stock price due to goodwill impairment,which seriously damaged the stability of the capital market.The appearance of goodwill impairment in premium mergers and acquisitions will not only bring negative effects to listed companies,but also cause serious economic consequences to medium and small investors and the market.This paper will focus on the premium merger case of Huace Film & Television’s acquisition of Kerton Media,and study the goodwill impairment and other related issues behind it.Firstly,the author studies the literatures related to goodwill impairment at home and abroad to deeply discuss the reasons of premium merger and acquisition,goodwill impairment and its possible economic consequences.Secondly,combined with the overall goodwill and impairment status of the media industry,the merger case of Huace Film and television is reviewed in detail and the merger motivation of the two parties is analyzed.Thirdly,the formation of Huace Film and television goodwill and the reasons for impairment are analyzed,and then the event study method is used to reflect the short-term market reaction after goodwill impairment.At the same time,relevant financial indicators are selected to evaluate the long-term financial performance after goodwill impairment.Finally,based on the above analysis,relevant risk prevention suggestions are put forward from three different perspectives,namely the regulatory layer,the M&A enterprise itself and the investors.The results of this paper are embodied in the cause analysis and economic consequences.Firstly,in the aspect of cause analysis,this paper draws the following four conclusions: First,under the framework of income method,Huace Film &Television Association overestimates the target enterprise,and there is a risk of goodwill impairment;Second,Huace Film & Television relies too much on its subsidiaries,which will be affected by the performance change of Kerton Media in2019,resulting in goodwill impairment.Third,Huace Film & Television has the earnings management motive to manipulate goodwill impairment by the COVID-19epidemic;Fourthly,the behavior of major shareholders of Huace Film and television to reduce their holdings accurately in advance makes the existence of goodwill impairment manipulation motive suspected.Second,in terms of economic consequences,this paper draws the following two conclusions: First,in terms of non-financial performance,firstly,affected by the COVID-19 epidemic and the goodwill impairment of most media companies in the industry,Huace Film &Television has little impact on the short-term market of the company;Secondly,Huace film and television goodwill impairment makes the company’s market share decreased significantly;Finally,a large amount of goodwill impairment caused the reputation of Huace film and television damaged;Second,in terms of financial performance,the development potential,profitability and value creation ability of Huace Film and Television have been reduced to varying degrees after goodwill impairment,which has a negative impact on the long-term performance of the enterprise.Through the above analysis,this paper aims to provide effective suggestions for the listed companies in the media related industries as well as the majority of investors,and obtain inspiration from them.