Summary:
Goodwill bubbles generated by the M&A boom have recently become an important financial risk factor. The economic consequences of such a bubble for listed firms and the capital market as a whole have raised concerns among shareholders and regulatory authorities. Thus, preventing goodwill bubbles has attracted much attention from practitioners and academics. Managers are deeply involved in the entire M&A process, directly participating in the formulation and implementation of M&A plans and being the main decision makers in the selection and valuation of M&A targets. Therefore, managers' motivation directly impacts M&A, including the scale and amount of goodwill. Principal-agent theory holds that agency conflicts in M&A activities cause executives to pay more attention to their private interests at the expense of shareholder wealth created by M&A activities. Furthermore, the existence of agency problems drives executives to rely on their information and decision-making advantages to increase the frequency and scale of M&A and even pay a higher premium to complete M&A, which leads to the overestimation of goodwill. This leads to the question of how to prevent goodwill bubbles. In addition to internal control quality and external auditing, the innovation of basic market mechanisms is required to restrain goodwill valuation bubbles. The implementation of a margin trading mechanism is an innovation in China's stock market and opens the door to short selling. Research on short selling predominantly focuses on two areas. The first is the effect of short selling on the liquidity, stability, and efficiency of stock prices. The second is the effect of short selling on corporate financial decisions, such as earnings management, investment policy, and firm innovations. Studies generally indicate that short selling has the function of price discovery and can be an effective external corporate governance mechanism that reduces earnings management, improves the efficiency of corporate investment, and enhances innovation expenditure and output. However, few studies have investigated whether short selling can restrain the formation of goodwill bubbles caused by M&A decisions. We explore the effect of short selling on M&A goodwill bubbles using a sample of Chinese A-share listed firms from 2007 to 2017. Our findings are as follows: (1) After lifting the short-selling constraint, excess goodwill significantly declines and goodwill assets also decline, which indicates that the short-selling transaction mechanism significantly inhibits goodwill bubbles; (2) The restraining effect of short selling on the M&A goodwill bubble is stronger for private enterprises than for state-owned enterprises; (3) Short selling can restrain goodwill bubbles through channels such as increased analyst coverage and increased managerial incentives; (4) The effect of short selling on goodwill bubbles is more pronounced for firms in regions with more developed financial intermediaries or lower industry competition; (5) Short selling improves stock price efficiency by restraining goodwill bubbles;(6) Short selling increases firm profitability. Our study makes three main contributions to the literature. First, this article based on the deregulation of short selling in the capital market, provides new ideas for how to suppress an M&A goodwill bubble, and contributes to the literature by examining the effect of short selling on goodwill bubbles. Second, as an external governance mechanism, the short-selling transaction mechanism plays an effective governance role in M&A decisions. Studies examine the governance effect of the short-selling transaction mechanism based on the performance of M&A but ignore the impact of short selling on goodwill valuation bubbles, which are an important invisible economic consequence of M&A. Thus, we fill a research gap in this new field. Third, we find that short selling can restrain goodwill bubbles through channels such as increased analyst coverage and increased managerial incentives, which has implications for policymakers to improve the structure of China's capital market and protect the interests of investors.
[1]陈晖丽和刘峰,2014,《融资融券的治理效应研究——基于公司盈余管理的视角》,《会计研究》第9期,第45~52+96页。 [2]陈胜蓝和马慧,2017,《卖空压力与公司并购——来自卖空管制放松的准自然实验证据》,《管理世界》第7期,第142~156页。 [3]杜兴强、杜颖洁和周泽将,2013,《商誉的内涵及其确认问题探讨》,《会计研究》第1期,第11~16页。 [4]方军雄,2008,《政府干预、所有权性质与企业并购》,《管理世界》第9期,第118~123+148+188页。 [5]冯卫东和郑海英,2013,《企业并购商誉计量与披露问题研究》,《财政研究》第8期,第29~32页。 [6]傅超、杨曾和傅代国,2015,《“同伴效应”影响了企业的并购商誉吗? ——基于我国创业板高溢价并购的经验证据》,《中国软科学》第11期,第94~108页。 [7]顾乃康和周艳利,2017,《卖空的事前威慑、公司治理与企业融资行为》,《管理世界》第2期,第120~134页。 [8]靳庆鲁、侯青川、李刚和谢亚茜,2015,《放松卖空管制、公司投资决策与期权价值》,《经济研究》第10期,第76~88页。 [9]李春涛、刘贝贝和周鹏,2017,《卖空与信息披露:融券准自然实验的证据》,《金融研究》第9期,第130~145页。 [10]李丹蒙、叶建芳、卢思绮和曾森,2018,《管理层过度自信、产权性质与并购商誉》,《会计研究》第10期,第50~57页。 [11]李志生、李好、马伟力和林秉旋,2017,《融资融券交易的信息治理效应》,《经济研究》第11期,第150~164页。 [12]刘汉民,2002,《所有制,制度环境与公司治理效率》,《经济研究》第6期,第63~68页。 [13]马云飙、武艳萍和石贝贝,2021,《卖空机制能够约束内部人减持吗?——基于融资融券制度的经验证据》,《金融研究》第2期,第171~187页。 [14]权小锋和尹洪英,2017,《中国式卖空机制与公司创新: 基于融资融券分布扩容的自然实验》, 《管理世界》第1期,第128~144页。 [15]王文姣、傅超和傅代国,2017,《并购商誉是否为股价崩盘的事前信号?——基于会计功能和金融安全视角》,《财经研究》第9期,第77~88页。 [16]王小鲁、樊纲和余静文,2016,《中国分省份市场化指数报告(2016)》,社会科学文献出版社。 [17]魏志华和朱彩云,2019,《超额商誉是否成为企业经营负担——基于产品市场竞争能力视角的解释》,《中国工业经济》第11期,第174~192页。 [18]谢纪刚和张秋生,2013,《股份支付、交易制度与商誉高估——基于中小板企业并购的数据分析》,《会计研究》第12期,第47~52页。 [19]张璇、周鹏和李春涛,2016,《卖空与盈余质量——来自财务重述的证据》,《金融研究》第8期,第175~190页。 [20]朱松和夏冬林,2010,《稳健会计政策、投资机会与企业投资效率》,《财经研究》第6期,第69~79页。 [21]Abughazaleh, N. M., O.M. AlHares, and C. Roberts. 2011. “Accounting Discretion in Goodwill Impairments: UK Evidence” , Journal of International Financial Management & Accounting, 22(3):165~204. [22]Ammann, M., D. Oesch, and M.M. Schmid. 2011. “Product Market Competition, Corporate Governance, and Firm Value: Evidence from the EU Area”, European Financial Management, 19 (3): 452~469. [23]Barron, O.E., D. Byard, and O. Kim. 2002. “Changes in Analysts' Information Around Earnings Announcements”, Accounting Review, 77 (4): 821~846. [24]Callen,J. L. and X. Fang. 2015. “Short Interest and Stock Price Crash Risk”, Journal of Banking & Finance,60(11):181~194. [25]De Angelis, D., G. Grullon and S. Michenaud. 2017.“The Effects of Short-Selling Threats on Incentive Contracts: Evidence from An Experiment”, Review of Financial Studies, 30(5) :1627~1659. [26]Chang, E. C., T. C. Lin and X. Ma. 2019. “Does Short-selling Threat Discipline Managers in Mergers and Acquisitions Decisions?”,Journal of Accounting and Economics, 68 (1): 101~223. [27]Diamond, D. W. and R. E. Verrecchia. 1987. “Constraints on Short-Selling and Asset Price Adjustment to Private Information” , Journal of Financial Economics, 18 (2): 277~311. [28]Fang, V., A. Huang and J. M. Karpoff. 2016. “Short Selling and Earnings Management: A Controlled Experimen” , Journal of Finance, 71 (3): 1251~1292. [29]Grinstein, Y. and P. Hribar. 2004. “CEO Compensation and Incentives: Evidence from M&A Bonuses” , Journal of Financial Economics, 73 (1): 119~143. [30]Hong, H. and J. C. Stein. 2003. “Differences of Opinion, Short-Sales Constraints and Market Crashes” , Review of Financial Studies, 16 (2): 487~525. [31]Hutton,A. P.,A. J. Marcus and H. Tehranian. 2009. “Opaque Financial Reports,R2 and Crash Risk”,Journal of Financial Economics,94(1):67~86 [32]Jensen, M.C. 1986. “Agency Cost Of Free Cash Flow, Corporate Finance, and Takeovers”, American Economic Review, 76 (2): 32~329. [33]Li, K,K., and R.G. Sloan. 2017. “Has Goodwill Accounting Gone Bad?”, Review of Accounting Studies, 22 (2):964~1003. [34]Massa, M., B.Zhang and H.Zhang. 2015.“The Invisible Hand of Short Selling: Does Short Selling Discipline Earnings Management?”, Review of Financial Studies, 28 (6): 1701~1736. [35]Miller, E. 1977. “Risk, Uncertainty and Divergence of Opinion” , Journal of Finance, 32 (4): 1151~1168. [36]Mueller, D. C., and M. L. Sirower. 2003. “The Causes of Mergers: Tests Based on the Gains to Acquiring Firms' Shareholders and the Size of Premia”,Managerial and Decision Economics, 24(5): 373~391. [37]Ramanna, K. 2008.“The Implications of Unverifiable Fair-value Accounting:Evidence from the Political Economy of Goodwill Accounting”, Journal of Accounting and Economics,45(2):253~281. [38]Shi, W., R.E. Hoskisson and Y.A. Zhang. 2017. “Independent Director Death and CEO Acquisitiveness: Build an Empire of Pursue a Quite Life?” , Strategic Management Journal ,38 (3): 780~792. [39]Slusky, A. R., and R. E. Caves. 1991. “Snergy, Agency, and the Determinants of Premia Paid in Mergers” , The Journal of Industrial Economics, 39(3):277~296. [40]Yu, F.F. 2008.“Analyst Coverage and Earnings Management”, Journal of Financial Economics, 88 (2): 245~271.