Management Overconfidence And M&A Premium

In the past two decades,China's economic development has entered a period of rapid growth,and the economic development has provided an opportunity for M&A activities among Chinese enterprises.With the rapid development of the economy,the number of M&A activities and the amount of M&A transactions in China have also grown rapidly.However,a large number of studies have shown that M&A activities between companies are not always effective.Why does M&A couldn't produce benefits,but companies are still rushing to conduct M&A activities? In order to clarify this issue,domestic and foreign scholars have studied the reasons for the inefficiency of M&A activities.They found that high premiums are common in M&A activities,and the ineffective payment of high premiums is the main reason for the failure or even bankruptcy of M&A.With the development of behavioral finance,more and more scholars have begun to pay attention to the impact of management overconfidence on corporate investment decisions.Therefore,this paper decided to study and analyze the relationship between the M&A premium from the management.This paper firstly combs and summarizes relevant literatures on management overconfidence psychology,merger and acquisition premium and management overconfidence psychology on M&A activities,and analyzes and summarizes the theoretical basis of synergy theory,principal-agent theory and overconfidence theory.Then,on the basis of theoretical analysis,this paper takes the M&A events occurring in the A-share market of Shanghai and Shenzhen in 2006-2017 as the research sample,and uses the principal component method to construct the evaluation system of the management's overconfidence psychology.And calculated the score of the enterprise management's overconfidence psychology in the sample;then used the multiple regression analysis method to test the relationship between management overconfidence and M&A premium,and introduced the corporate governance index and the marketization degree index as management.The adjustment factors of the relationship between over-confidence and M&A premium are examined separately for their impact on the relationship between management overconfidence and M&A premium.The main conclusions of this paper are as follows: First,when the management's overconfidence is more serious,the higher the M&A premium paid in M&A activities,that is,the management's overconfidence is significantly positively correlated with the M&A premium.Compared with state-owned enterprises,private enterprises The overconfidence of managers has a more significant impact on the level of M&A premiums.Second,corporate governance can effectively curb the positive relationship between management overconfidence and the M&A premium.In state-owned enterprises,this suppression is more obvious than that of private enterprises.Second,the degree of regional development will also inhibit the positive impact of management overconfidence on the M&A premium.However,in state-owned enterprises,the degree of regional development does not affect the relationship between management overconfidence and the M&A premium.