The Impact Of Common Audit On M&A Decisions And Consequences

As capital markets continue to mature,the scale and volume of M&A business in China has begun to grow rapidly.However,due to inherent limitations in the transparency of information disclosure in the current capital market,information asymmetry between parties in M&A activities remains significant,posing significant risks to M&A activities.As a result,the active M&A market has been accompanied by a proliferation of blizzard events such as large goodwill impairments in M&A,which have had a negative impact on the capital markets.Against this backdrop of information barriers,companies tend to use their social networks to obtain more information than through publicly available information or a version of due diligence channels.The recent M&A activities,however,have seen a gradual increase in the practice of both sides hiring the same accounting firm for annual audits prior to M&A.Whether the existence of such shared audits has an impact on M&A activities and how they can be effective as information channels in all aspects of M&A compared to other M&As is of great significance in further improving M&A risk control and maintaining the stability of the M&A market.This paper first summarises the current stage of research on shared audit through a literature review,as well as the current state of research on M&A target selection,M&A goodwill and impairment and M&A performance based on this paper’s research perspective.At the theoretical level,this paper explores the impact mechanism of shared audit theory on M&A activities by analysing information misalignment theory and social network theory.Based on the above literature review and theoretical foundation,this paper combines a typical case of sharing the same firm and sharing multiple signatory accountants with research methods such as event study method,comparative analysis method and financial index study method to explore the specific effects of shared audit on the selection of M&A targets and M&A performance in the M&A of Techspray Environment by East Lake High-tech.The study found that the shared auditors were able to understand the real operating and financial situation and some internal information of both parties through their audit activities,and built up a certain trust relationship with the management of both parties.When there were information asymmetry and uncertainty risks between the two parties,the shared auditors significantly reduced these risks through their information advantages and building a bridge of information communication between the two parties,and played a positive role in optimising M&A pricing,improving market response and It also plays a positive role in optimising M&A pricing,improving market response and subsequent corporate performance.Based on the above findings,the paper finally makes recommendations for M&A parties,auditors and regulators respectively.The innovations and contributions of this paper are: Firstly,based on the existing empirical studies,this paper investigates the impact of shared audit on M&A through a case study approach,combining typical cases and features from the selection of the M&A target to the economic consequences,which elaborates the research perspective of shared audit and enriches the existing literature to a certain extent.Secondly,this paper presents a case study of the definition of shared audit in existing empirical research,which is mostly defined as the engagement of the same accounting firm.In this paper,the definition of shared audit is defined as the engagement of the same accounting firm,but in this study,the definition is more precise,including the sharing of the same branch office and the same signing accountant,which strengthens the effect of shared audit information transfer and makes the study more typical and convincing.