Effect Of CEO Power On Decision-making And Performance Of M & A

The company’s motivation of merge and acquisition are often complex and diverse. In the principal-agent theory, managers are not only the executor of the decisions from the shareholders, but also have the right to make their own decisions, which is often the dominant decision-making, so that they can control more resources to obtain private benefits and complete their "management empire." Such instruments usually include mergers and acquisitions, over-investment and diversification and so on. However, there is a big different of managers’power between state own companies and private companies. Core of this paper is:under the agency relationship between owners and managers, whether CEO will use of authority to launch acquisitions to grab selfish interests rather than to bring value to the business.Our research methods are as follows. The first step, select the Shanghai and Shenzhen listed companies as samples in 2009-2011. Use principal component analysis to calculate comprehensive score CEO power, A logistic regress is used to analysis the relationship between CEO power and M & A decision. The second step, Regression analysis of the relationship between CEO power and M & A performance with 1412 M & A samples. Taking into account our countries special enterprise property right background, two regression analyzes were separated into sub-sample test by the nature of property rights.Our conclusions is that the CEO power is positively related to M & A decisions, and negatively related to M & A performance. The results in the state-owned enterprises is more significant. Therefore, the board should concern more about CEO’s merger behavior, strengthen the control of the company and optimize the salary evaluation mechanism, to curb the self-interest management behavior.