Managers' Overconfidence And Financial Performance Commitment In Mergers And Acquisitions

In recent years,Chinese enterprises have been very active in M&A.Large number of mergers and acquisitions have an important impact on the rights and interests of the original shareholders,and the small and medium-sized shareholders especially have strong feelings about it.However,the cases of infringement on the interests of the small and medium-sized shareholders are not uncommon.In order to protect their rights and interests,the Measures for the Major Asset Restructuring of Listed Companies specifies the requirements of financial performance commitments.So many literatures discussion on the market reaction and company performance of financial performance commitments,but there're few papers focus on the influencing factors.Because the overconfident managers in decision-making center has a significant impact on the transaction number,the transaction prices,the distribution of rights and interests of both sides and the formation of M&A contracts.The effect of managers' overconfidence on financial performance commitment agreements cannot be avoided.Therefore,based on the major asset reorganization events of A-share listed companies in Shanghai and Shenzhen Stock Exchanges from May 18,2008 to December 31,2017,this paper verifies the relationship between overconfidence of managers and the financial performance commitment agreements.At the same time,the requirements for the financial advisers in major asset restructuring make it possible for them to have an important impact on M&A transactions.Does a highly reputable financial adviser have more information content? Does it play a different role from that of a general financial adviser when an overconfident manager makes decisions about financial performance commitments? Current research on the reputation of financial advisers is still difficult to provide an answer to this question.Furthermore,this paper explores the moderating role of financial advisor's reputation in the relationship between managers' overconfidence and financial performance commitment agreements.In addition,as an important internal governance mechanism,equity balances play an important role on the choice of corporate management strategies and the effect of policy implementation.Whether equity balances improve or hinder the efficiency of corporate governance remains controversial.Therefore,this paper chooses to make a comparative analysis of the relationship between managers' overconfidence and financial performance commitment under different conditions of equity balances.The main contents of this paper are as below.The first part raises the questions and combs the research foundation.(1)Explain the background and significance of the topic,define the object of study,introduce the content and framework of the study,and explain the technical route and specific methods of the study.(2)Introduce the theoretical basis of this paper.(3)Review and comment on relevant literatures.This paper reviews the relevant literatures and combs out the vacancies in these researches.The second part uses empirical analysis to verify following relationships.(1)Validation of the relationship between managers' overconfidence and financial performance commitment agreements.The effects of managers' overconfidence on the signing of financial performance commitment and the growth rate of financial performance commitment were tested respectively.At the same time,considering the differences between the mandatory and voluntary nature of financial performance commitment,a comparative analysis was conducted with two groups.(2)Validation of the relationship between managers' overconfidence and financial performance commitment rate.This paper analyses whether managers' overconfidence will affect the financial performance commitment fulfillment rate,and makes a comparative analysis after classifying financial performance commitment according to the mandatory and voluntary criteria.(3)Validation of the moderating role of financial consultants' reputation and the regulatory role of equity balances.Verify the variation on the relationship between managers' overconfidence and financial performance commitment when the condition of financial consultant reputation and equity balance of listed companies is changed.The third part is conclusion,enlightenment and prospect.According to the results of theoretical analysis and empirical test,this part summarizes the main conclusions.It elaborates the corresponding enlightenment obtained through the study.Finally,this part points out the innovations and deficiencies of this paper and the direction for future researches.The following content is the main conclusions of this paper.(1)When managers are overconfident,the probability of reaching financial performance commitment agreement is smaller and the growth rate of financial performance commitment is lower.The average growth rate of financial performance commitment of voluntary financial performance commitment is significantly higher than that of mandatory financial performance commitment.Moreover,under the condition of voluntary financial performance commitment,the negative correlation between managers' overconfidence and growth rate of financial performance commitment is more significant.(2)When managers are overconfident,financial performance commitment is less fulfilled.The mean financial performance commitment fulfillment rate of voluntary financial performance commitment is significantly lower than that of mandatory financial performance commitment.If the financial performance commitment is voluntary,the negative correlation between managers' overconfidence and financial performance commitment's fulfillment rate would be more significant.(3)The reputation of financial advisers significantly affects the relationship between managers' overconfidence and the signing of financial performance commitment agreement,and the relationship between managers' overconfidence and financial performance commitment's growth rate.While it cannot effectively regulate the relationship between managers' overconfidence and financial performance commitment's fulfillment rate.The lower the reputation of financial consultants employed by listed companies,the more significant the negative correlation between managers' overconfidence and the signing of financial performance commitment agreement.The lower the reputation of financial consultants,the more significant the negative correlation between managerial overconfidence and financial performance commitment's growth rate,too.(4)Equity balances significantly reflect the relationship between managers' overconfidence and financial performance commitment agreement,financial performance commitment growth rate and financial performance commitment fulfillment rate.The lower the equity balances of listed companies,the more significant the negative correlation between managers' overconfidence and signing of financial performance commitment agreement.The same results will also come to the correlation between managers' overconfidence and financial performance commitment growth rate and the correlation between managers' overconfidence and financial performance commitment fulfillment rate.The possible innovations of this paper are as follows.First of all,it innovates the research method of financial performance commitment,and divides financial performance commitment into two types: mandatory and voluntary,which provides a new direction for the follow-up research.Secondly,from the perspective of psychology and behavior,this paper analyzes and confirms the impact of managers' overconfidence on the formation and implementation of financial performance commitment agreements.Thirdly,from the perspective of ownership structure and intermediary institutions,it reveals the corresponding regulatory mechanism in the relationship between managers' overconfidence and financial performance commitment.