Research On The Relationship Between Goodwill And Operating Performance Of Listed Companies

In 2006,the Ministry of Finance of China issued new accounting standards.The current accounting standards require the listed companies in China to disclose the value of consolidated goodwill as a separate asset in the financial statements,and the subsequent measurement method has also been changed from the system amortization to the impairment test on the annual basis.With the blooming Chinese M&A market,the volume of M&A and corporate reorganization activities have risen sharply,and the amount of goodwill and its impairment disclosed by Shanghai market-listed companies increases significantly every year.At the end of 2016,the overall goodwill balance of Shanghai market-listed companies has reached the trillion RMB milestone,and the value of overall goodwill impairment has reached 9.889 billion.At the end of 2018,there were many significant goodwill impairment event happened in Shanghai market-listed companies,as the performance of these companies plummeted,and the willingness of firms in participating the M&A activities is dramatically reduced.With the rising of percentage of goodwill in the total assets of enterprises,the research on the goodwill attract more and more attention from China and western countries.Experts and scholars hold the opinion that the goodwill is an asset that can bring future economic benefits to enterprises.However,the current standards in China is unclear to the question that if the confirmation and measurement method of consolidated goodwill can truly reflect the economic essence of goodwill.Reviewing the historical situation of goodwill in the Shanghai market,it is obvious that the huge balance of goodwill and the high impairment of goodwill have an negative impact on enterprises and the capital market.Based on the complexity of goodwill assets,both the academic and practical realm have carried out continuous research and focused attention on issues related to goodwill.Based on the background discussed above,on the basis of sorting out the theoretical research results of domestic and foreign scholars,this paper comes from the basis of the mergers and acquisitions of listed companies that occurred in the main board in Shanghai market from 2011 to 2020.An empirical study is carried out on the relationship between goodwill and business performance by matching the M&A event with the subsequently diclosed goodwill.Using principal component analysis(PCA)to obtain the comprehensive performance score of the enterprise as the standard to measure the operating performance,and considering the lag of the goodwill synergistic effect.This study takes the operating performance of the current period,one,two,and three lag periods as the explained variables.The empirical study comes from three different perspectives:the relationship between consolidated goodwill and business performance,the relationship between goodwill and business performance of enterprises with different equity properties,and the relationship between goodwill and business performance of enterprises with different life cycles.The research results show that the goodwill confirmed by the listed companies in the current year have a significant negative impact on the business performance of the company in both the current period and the lag period;compared with state-owned enterprises,the negative relationship between goodwill and business performance of non-state-owned enterprises is more significant;The negative impact of the goodwill of the enterprises in the growth period on the current and lag period business performance is more significant.Finally,the conclusions are generated from three perspectives:merger and acquisition activities of listed companies,disclosure and supervision of goodwill,and improvement of goodwill accounting standards.This article enriches the empirical research literature on the goodwill,helps the listed companies to better understand the nature of goodwill in mergers and acquisitions and the economic impact of goodwill confirmed in mergers and acquisitions,and provides regulatory and standard-setting departments In the future,it also provides evidence and reference for the regulatory authorities to track,predict,and control the goodwill impairment risk of mergers and acquisitions of listed companies in the capital market.