Based on the frequent mergers and acquisitions of listed companies in recent years, this paper empirically examines the impact of M&A goodwill on stock mispricing by selecting Chinese A share listed companies from 2007 to 2019. The study found that goodwill exacerbated the mispricing of the acquirer’s stock, and the stock price of the company with high goodwill was seriously overvalued. The provision of goodwill impairment can convey incremental information to investors and alleviate the stock mispricing caused by goodwill. The intrinsic reason that M&A goodwill leads to stock price overvaluation is that the major shareholders and the management of listed companies use M&A and reorganization as a means to conduct “pseudo market value” management, promote short term stock price and achieve high reduction of holdings. It is found that accounting conservatism and investors sentiment play partial mediating roles in the influence of M&A goodwill on stock mispricing. The conclusion of this study is helpful for investors to correctly price the goodwill of merger and acquisition, and has certain enlightenment for improving the pricing efficiency of capital market and maintaining the stability of financial market.