CEO Power And The Frequency And Performance Of Enterprise Mergers And Acquisitions

As the highest decision maker in the enterprise management,CEO has great power in the enterprise,but it also causes some problems.With the rapid development of China's capital market,the enterprise Mergers and Acquisitions has become an important way to achieve some strategies such as the rapid expansion of the enterprise scale or other important purposes,but the consequences of M&A still need further research.On the other hand,CEO as an important participant in the enterprise Mergers and Acquisitions,the impact of the CEO power for the Mergers and Acquisitions also need to be further studied.Therefore,this paper is from the perspective of CEO power to study the Mergers and Acquisitions frequency and performance of the purchaser company's CEO power.This paper mainly uses the literature research method,deductive method and empirical hypothesis test and other methods.Based on quantities of literatures,this paper summed up the research development and the present status of the research.Besides,according to the principal-agent theory,rent-seeking theory,managerial power theory,and excessive confident and self-serving hypothesis,this paper deduces two hypotheses: when the enterprises CEO have great power,the M&A frequency is high,and the M&A performance is worse.In the theoretical analysis,based on the principal-agent theory,rent-seeking theory and overconfidence theory,due to the CEO's compensation level is likely to be linked to the size of the company,in order to maximize the pursuit of personal interests,CEO may use their powers to promote the implementation of Mergers and Acquisitions.With the CEO needs to devote more time and energy to work than before in the process of Mergers and Acquisitions,which provides a reasonable excuse for CEO to demand higher salary,which in turn also causes CEO has stronger motivation to promote Mergers and Acquisitions frequently.On the other hand,people who work in the company are listening to CEO's instructions in the daily management,so that CEO tend to expand the scale of the enterprise through Mergers and Acquisitions.These factors make it possible for firms with greater CEO power to have higher frequency of Mergers and Acquisitions.In the process of Mergers and Acquisitions,the powerful CEO tend to be too optimistic about the prospects of Mergers and Acquisitions,or mainly concerned about their personal interests,which makes the enterprise may not achieve the desired goals such as management synergy effect,operating synergy effect and financial synergy effect.While in the process of Mergers and Acquisitions the purchaser enterprise are likely to pay more than the true value of the target enterprise in the merger price,and then the purchaser enterprise have not obtained management and financial synergistic effect in M&A.CEOs who are too confidence in his management skills probably didn't handle well the integration of enterprise management,enterprise culture and other important aspects after M&A.These factors are likely to make the purchaser enterprise M&A performance show a downward trend,and lead to the performance of enterprises with greater CEO power has become worse after M&A.In the part of empirical research,this paper selects the data from 2007 to 2012 in the CEO power and the frequency and performance of Mergers and Acquisitions,and adds the data of CEO power and enterprise merger frequency from 2013 to 2014 in the robust test.The results show that,regardless of the correlation test or multiple regression analysis,CEO power and the frequency of Mergers and Acquisitions are positive correlation,but the CEO power and the purchaser enterprise's merger performance is negatively related.Which means the greater the CEO power of the purchaser enterprises,the greater the frequency of Mergers and Acquisitions.However,after Mergers and Acquisitions,CEO power has a negative impact on M&A performance,which means the greater the power of CEO,the worse the performance of purchaser enterprises.According to the results of the study,it is necessary to allocate the power of CEO reasonably in corporate governance.When the CEO power is large,it is easy to form personal dictatorship in the enterprise,which has a negative impact on the long-term development of the enterprise.Therefore,enterprises can increase the supervision of CEO power in the corporate governance system.When making decisions about important issues,enterprises should increase the participation of important departments and experts to improve the feasibility and rationality of enterprise decision.Therefore,enterprises can establish some M&A strategic Committees which are composed by related fields experts,then improve the feasibility and rationality of mergers and acquisitions,and reduce the probability of failure.