The Impact of Excess Goodwill on Corporate Innovation
The Impact of Excess Goodwill on Corporate Innovation
Author：Zhang Xin, Dong Zhu Journal：Nankai Business Review Date：2021-04
Abstract:
M&A is a topic widely discussed in capital market research. In recent years, with the continuous expansion of M&A activities of Listed Companies in China, the goodwill generated by them has also accumulated rapidly. This paper selects Shanghai and Shenzhen A-share listed companies from 2009 to 2017 as samples to empirically test the impact of excess goodwill on corporate innovation. The results show that excess goodwill has a significant negative impact on innovation output and innovation efficiency. After a series of robust tests, such as changing the econometric model, changing the measurement method of main research variables, changing samples, and using instrumental variable estimation and propensity matching score
method to control endogeneity, the conclusion still holds. Furthermore, the mechanism study shows that excess goodwill affects corporate innovation mainly by increasing debt financing costs and analysts' optimistic bias. It is found that the internal and external corporate governance mechanism cannot alleviate the negative impact of excess goodwill on corporate innovation, while the improvement of accounting information quality and market information quality can significantly reduce the adverse impact of excess goodwill on corporate innovation. Finally, the heterogeneity analysis shows that the negative impact of excess goodwill on innovation performance of non-state-owned enterprises, high-tech enterprises, product market competition
and better institutional environment is more significant. This article not only enriches the research on the field of excess goodwill and corporate innovation, but also has important implications for investors, listed companies and regulators to better understand the economic consequences of goodwill bubbles.
Key words:
Excess Goodwill; Corporate Innovation; Cost of Debt Financing; Analyst Optimism Bias
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