Abstract:

This study takes the Chinese listed companies that recorded a significant impairment loss of goodwill from 2018 to 2020 as the sample, and conducts exploratory analysis on the common features and corresponding weights of these companies during the M& A period, using descriptive statistics and factor analysis methods. The study constructs a case portrait of “wrong M& A” and finds that strong profitability, small asset size, weak risk resistance, and excessive self-confidence of management are the main common characteristics of the acquiring companies in “wrong M& A”. Furthermore, the study applies factor analysis to summarize and classify the indicator system of the case portrait, and extracts five common factors, including company size, profitability, growth confidence, debt-paying ability, and governance supervision. The corresponding weights of these factors in explaining the information of the “wrong M& A” sample are 0.384, 0.190, 0.146, 0.144, and 0.134, respectively. Among them, the strong profitability of the “wrong M& A” companies is a “profit curse” characteristic that deserves attention. Therefore, listed companies should not only be cautious of the misleading effect of high profitability on M& A decision-making but also strengthen their internal monitoring mechanisms and carry out diversified M& A rationally.

Key words: goodwill impairment, wrong M& A, case portrait, listed companies, M& A performance, company profitability