Analysis of the Impact of M&A Goodwill on a Firm's Total Factor Productivity

-- Empirical Evidence from Panel Data of Chinese Listed Companies

Abstract

Using A-share listed companies in Shanghai and Shenzhen from 2008 to 2020 as the original sample, this paper focuses on the impact of M&A goodwill and on the total factor productivity of firms, so as to gain an in-depth understanding of the profound effect of M&A goodwill on firms. The main findings of this paper are: (1) M&A goodwill is negatively related to total factor productivity, i.e., it significantly reduces the total factor productivity of firms. (2) The mechanisms by which M&A goodwill affects firms' total factor productivity are: first, M&A goodwill changes asset allocation decisions, and second, it increases firms' executive compensation and Over-indebtedness. The research in this paper is based on a new perspective of M&A goodwill, which enriches and extends the micro foundations of total factor productivity theory. It also provides a detailed empirical analysis of the association between M&A goodwill and corporate total factor productivity from the perspective of listed companies as a whole, which is innovative. The further analysis of the relevant reasons remedies the lack of understanding of this aspect in the previous literature. In addition, the findings of this paper provide reflections and policy implications from three perspectives: firms themselves, regulators and investors.