A Study About The Effect Of Managerial Overconfidence On The Merger Decision And Performance Of Listed Companies

As one effective and important way of readjusting the industrial structure and making indirect investment, Mergers and acquisition has a history of more than 100 years in western countries and have gone through five waves there. In China, there were also three M&A waves. Thus M&A has been an effective approach for Chinese listed companies to pursue rapid development. However, M&A brings about great risk along with shortcut for rapid expansion. Researches of reorganization performance taken by Chinese scholars have shown that many merges driven by China’s listed companies are low efficiency with waste. M&A and reorganization operation is destructive for acquiring companies’performance in some degree, The“strange phenomenon”that frequent M&A activities and low efficiency M&A activities both exit brings out two theoretical propositions.: What causes low efficiency M&A? Why are there so many executives in listed companies happily engaged in M&A? Traditional financial theory couldn’t explain such questions in reason. Western scholars begin to combine basic assumptions and research methods of behavioral finance with behaviors of enterprises’decision-make, studying executives’behavior features to supplement and complement enterprises’decision-making. Researches about overconfident psychological features are most among them. China is in a rapid developing transition period, managers’overconfident features are much more clear. Thus there are abundant practical guiding significance to apply managers’overconfidence in M&A researches of Chinese listed companies.This article makes theoretical analyze and empirical research on the relationship between managers’overconfidence and M&A decisions and related performance from the perspective of behavioral finance, which is based on the shareholdings and Characteristics of change of executives in Chinese listed companies from 2006 to 2008.Emperical research in chapter 4 shows that managers’overconfidence level is positively correlated with M&A decisions, which means that overconfident managers are elements driving M&A activities. Further research shows that the independence degree of board of directors affects little about the relationship between managers’overconfidence and M&A activities. In companies where the board chairman is the general manager, the relation between managers’overconfidence and M&A activities is obviously weaker than the relation in companies where the two positions are combined. Overall, the boards of listed companies in our country don’t take up the responsibilities endowed by shareholders. Empirical research in chapter 5 demonstrates that managers’overconfidence is dramatically negatively correlated with companies’M&A performance, so it’s proved that managers’overconfidence is an important factor affecting companies’M&A performance.