An Empirical Study On Investor Sentiment,Managerial Overconfidence And M&A Performance

The implementation of share splitting reform promoted the marketization of mergers and acquisitions events and set off a new round of mergers and acquisitions climax in China. But in a large number of M&A activities, the "post-merger performance puzzle" appeared frequently. Based on efficient market and fully rational investors and managers, traditional financial theories failed to explain this heteromorphism. Therefore, based on behavioral corporate finance, this paper combines managerial overconfidence, investor sentiment and traditional M&A motivation theories together to systematically study the motives behind Chinese listed companies' M&A decisions and to analyze not only the impact of managerial overconfidence, investor sentiment and corporate governance on M&A performance, but also the impact path from a theoretical and empirical point of view. Through these studies, this paper tries to explain the "post-merger performance puzzle" fully and scientifically. Results of this paper provide a theoretical basis and empirical data support for Chinese listed companies to improve corporate governance, to establish a scientific investment decision-making mechanism and to protect the legitimate interests of shareholders in M&A activities. This paper discusses mainly from the following two aspects:The empirical study on managerial overconfidence, corporate governance and M&A performance. Based on listed companies' own M&A motivation, the paper abandons the "rational economic man" hypothesis and introduces the hubris hypothesis to comprehensively examine the impact of managerial overconfidence, principal-agent problem and free cash flow on M&A performance and inhibitory effect of corporate governance on managerial overconfidence. Empirical results show that managerial overconfidence is a key factor in leading to inefficient M&A activities. And different governance mechanisms can not only effectively alleviate the principal-agent problem to improve M&A performance directly, but also avoid blind expansion of business acquisitions through the inhibition of managerial overconfidence.The empirical study on investor sentiment, managerial overconfidence and M&A performance. Based on inefficient market(external drive), the paper empirically examines the impact of market mispricing due to investor sentiment on M&A activities and combines investor sentiment with managerial overconfidence to analyze the impact of investor sentiment on M&A performance and its impact path. Empirical results show that market mispricing due to investor sentiment leads to listed companies' M&A activities and the stock market driven acquisitions theory has some applicability in our country. Investor sentiment has a significant "deterioration effect" on M&A performance and there exists the "intermediate effect channel of managerial overconfidence" through which investor sentiment affects M&A performance indirectly.