Nature of Property Right, Free Cash Flow and Goodwill of M&A

Abstract

Chinese economy is shifting from a stage of rapid growth to a stage of high-quality development. M&A has become an important method to achieve extensive growth for Chinese companies. This paper takes Chinese listed companies on the Shanghai Stock Exchange and the Shenzhen Stock Exchange from 2007 to 2017 as research sample, and studies the relationship between free cash flow and goodwill, as well as the moderating effect of nature of property right on the relationship between free cash flow and goodwill in M&A. The research shows: first, free cash flow is significantly positive correlated to goodwill of M&A; second, compared with non-state-owned companies, the free cash flow has a weaker impact on the goodwill of M&A in state-owned companies.