Implications of Venture Capital on Companies’ M&A Goodwill Bubbles: Evidence from Chinese Listed Companies

The problem of goodwill bubbles is an important issue concerned by the current capital market. It is of great significance to explore the influencing factors of goodwill bubbles for effectively inhibiting goodwill bubbles and preventing and resolving financial risks. Taking A-share companies listed from 2014 to 2018 in China as samples, this study empirically tests the impact of venture capital institutions on M&A goodwill bubbles. We find that, compared with nonventure capital shareholding companies, the scale of M&A excess goodwill of venture capital shareholding companies is lower. That is, venture capital institutions can effectively inhibit M&A goodwill bubbles. The research on the impact mechanism shows that the inhibition of venture capital institutions on the M&A goodwill bubbles is mainly realized by reducing information asymmetry and easing agency conflict. Further research shows that, from the perspective of the participation of venture capital institutions, the higher the shareholding of venture capital institutions and the greater the number of venture capital institutions investing in the same company, the more they can inhibit M&A goodwill bubbles. From the perspective of internal and external governance environment, venture capital institutions are more able to inhibit M&A goodwill bubbles in enterprises with poor quality of internal control and marketization level.