"Herd Behavior" In Mergers & Acquisitions

M&A is one of the most important ways to allocate resources in securities market, but not all M&A transactions are efficient and rational. A lot of findings suggest that, although the transactions brought no profit in all, the frequency they occurred was quite high. This thesis makes a study of M&A transactions from the point of view of psychology bias of managers, and is mainly composed of three parts: First of all, by establishing a theoretical model of M&A decision-making, this thesis demonstrates the ability of"herding behavior"in interpreting irrational M&A.The hypotheses derived from the model are tested with the empirical M&A data of A-shares listed companies in Chinese stock market. The findings suggest that the M&A performance of the companies with fewer precedents in the same industry remarkably excelled the companies with more precedents. This validates the existence and impact on M&A performance of managers'"herding behavior"in decision-making. Nevertheless, when the M&A decision-making is distributed in different periods, the performance difference between the companies without precedents in the same industry and the ones with precedents is not notable enough. This may indicate that without excluding the influence of macro-economy, the comparison of inter-temporal M&A performance would not attain distinct economic significance.After this, the production of"conformity"in social psychology is applied to distinguishing the causes of"herd behavior". By establishing a factor of"intensity of demand"in corporate M&A, the A-shares listed companies in Chinese stock market are sorted into two categories. The hypothesis derived from social psychology is tested by two evaluation methods, and the findings suggest that except for the exceptional year, the distinguishing test about the causes of"herd behavior"would attain notable results unconditionally. The findings also show that the diversity of the causes among different years is coincident with the phylogeny of M&A in Chinese stock market completely.In the last part, this thesis uses the correlative production in compensation incentive for reference, and defines compensation"premium"as a concept of connotative incentive. Then the impact on"herd behavior"caused by managers'"reputation"concerning in M&A decision-making is tested with the empirical M&A data of A-shares listed companies in Chinese stock market. The findings suggest that the compensation"premium"may have distinct restraining effect on"herd behavior"in particular period, while in others the effect is not notable enough. On the basis of the argumentation mentioned above, we can also attain the consequence totally consistent with the second part by inversion method.