Non-controlling shareholders' network and excess goodwill: Evidence from listed companies in China

• Published in: International review of financial analysis 2024-11, Vol.96, p.103689, Article 103689
• Main Authors: Fu, Shaozheng, Yang, Jinkun, Liu, Jiajia, Hu, Guoqiang
• Format: Article
• Language: English
• Subjects: Excess goodwill; Governance effect; Information effect; Non-controlling shareholder's network; Resource effect
• ISSN: 1057-5219
• DOI: 10.1016/j.irfa.2024.103689

This study investigates the impact of non-controlling shareholders' network on corporate excess goodwill using Chinese publicly listed companies from 2007 to 2020. We find that a stronger centrality of non-controlling shareholders' network leads to a significant decrease in excess goodwill resulting from mergers and acquisitions. This implies that the non-controlling shareholders' network has a significant inhibitory effect on the occurrence of goodwill bubbles. Mechanism analysis finds that non-controlling shareholders' network can inhibit excess goodwill thorough information effect, resource effect, and governance effect. Furthermore, this inhibitory effect is attributed to pressure-resistant institutional investors and individual investors, and is more pronounced in firms located in less developed intermediary market and legal system environment, as well as firms with lower audit quality. In summary, the non-controlling shareholders' network plays a positive role in curbing excess goodwill in listed companies. •Non-controlling shareholders' network has the inhibitory effect on excess goodwill.•Network is constructed through shareholder's common ownership linkage.•Information, resource and governance effect are the influential mechanisms.•An important theoretical perspective on understanding equity structure network.•Network is a supplementary way to shareholder's supervision and self-protection.