Empirical Study on the Impact of Goodwill in Mergers and Acquisitions on Investment Efficiency of Listed Companies in A-Share Market

Abstract

Due to the current favorable economic situation in our country, companies are expanding their distribution scope by acquiring other small and medium-sized enterprises, leading to the emergence of goodwill in mergers and acquisitions. Investment efficiency is also an essential indicator for companies as it reflects their return on investment. Therefore, this article aims to find the relationship between the two through literature analysis and empirical research. Firstly, the origin and evolution of goodwill and the factors related to investment efficiency were analyzed through past literature, and the relevant theories related to goodwill in mergers and acquisitions and investment efficiency were discussed. Subsequently, the reasons for setting up research hypotheses were explained, and the corresponding sample selection was briefly summarized. Through regression analysis of variables and robustness tests, two conclusions were drawn. First, goodwill in mergers and acquisitions increased a company's non-efficiency investment, thereby reducing investment efficiency. Second, the inclusion of audit quality in the variables weakened the impact of goodwill in mergers and acquisitions on a company's investment efficiency. Therefore, two policy recommendations were proposed: to reduce a company's goodwill in mergers and acquisitions and to choose audit firms with relatively higher audit quality.