| In recent years,China’s listed companies have been repeatedly plagued by goodwill bubbles resulting in large goodwill impairments,which have had a serious impact on companies and the capital markets as a whole.As a major corporate matter,the outcome of M&A restructuring largely depends on executive decision-making,which,whether motivated by self-interest or limited by professionalism,often leads to the formation of excessive goodwill at the time of decision-making by executives,which in turn induces subsequent goodwill impairment.Therefore,companies need to monitor and check management power through effective governance mechanisms.The board of directors,as the core of corporate governance,is responsible for strategic planning and decision making,as well as monitoring the behavior of executives.The independence of the board of directors is an important prerequisite for its effective supervision and scientific decision-making.Therefore,it is particularly important to study whether board independence can inhibit the formation of excess goodwill and goodwill impairment of enterprises.In this paper,based on the literature review,the main effect,intermediary effect,and heterogeneity analysis hypotheses are proposed,taking the A-share listed companies in China from 2010 to 2020 as the sample.Subsequently,a model is developed to construct a board independence index(BIX)drawing on the constructive idea of the financing constraint KZ index to jointly measure the goodwill bubble by excess goodwill and goodwill impairment,empirically test the relationship between board independence and the goodwill bubble,and analyze the logic of the intrinsic influence of board independence on the goodwill bubble.Finally,the nature of property rights and the degree of external marketability indicators are introduced to explore whether the effect of board independence on the suppression of the goodwill bubble is affected by the effect of different indicators.The empirical results show that: first,board independence significantly suppresses corporate goodwill bubbles,i.e.,the higher the proportion of independent directors on the board,the higher the proportion of non-executive directors,and the separation of the chairman and general manager,the more beneficial it is for firms to suppress ex-ante excess goodwill and ex-post goodwill impairment;second,the suppressive effect of board independence on corporate goodwill bubbles is mainly achieved by improving the quality of corporate internal control and reducing executive overconfidence,i.e.,the quality of internal control and the degree of external marketability.Second,the inhibitory effect of board independence on corporate goodwill bubbles is mainly achieved by improving the quality of internal control and reducing executive overconfidence,i.e.,the quality of internal control and executive overconfidence play a partially mediating role;third,a group test based on the heterogeneity of corporate ownership and differences in external market environment reveals that the inhibitory effect of board independence on corporate goodwill bubbles is more significant in the sample of non-state-owned enterprises and more market-oriented.The research in this paper both broadens the research related to the influence of board independence on corporate M&A and provides a new empirical basis for the establishment of an early warning system for goodwill bubbles of listed companies in China.The study suggests that asset appraisal institutions should improve their appraisal models to provide more accurate goodwill appraisal opinions;listed companies should improve their internal control mechanisms and goodwill management measures to enhance the independence and professionalism of their boards of directors;policy-making departments should innovate goodwill appraisal methods and strengthen supervision to curb goodwill bubbles at the source and ensure the long-term and effective operation of the capital market. |
