Digital transformation and goodwill impairment

Abstract

We utilise a sample M&A listed on the Chinese A-shares market between 2008 and 2021. Our focus is specifically on A-share listed companies that acted as acquiring firms. We conduct an empirical analysis to investigate how their digital transformation influences goodwill impairment. We find that digital transformation significantly reduces goodwill impairment. Mechanism testing further suggests that digital transformation mitigates goodwill impairment by alleviating information asymmetry. The effect is more pronounced when the acquiring firms experience lower audit quality, less analyst coverage, or engage in cross-industry M&A. The main results are consistent following robustness tests. This study's findings provide valuable insights for enterprises that should accelerate digital transformation, improve information transparency and transmission efficiency, and reduce the degree of information asymmetry, thereby reducing the risk of M&A goodwill impairment.