Management Overconfidence?Debt Constraints And Mergers And Acquisitions Goodwill

Merger goodwill refers to the difference between the investment cost of the merged enterprise and the actual value of the merged enterprise,i.e.,merger premium.M&a goodwill brings great uncertainty to the future operation of enterprises.The huge amount of goodwill generated by high premium mergers and acquisitions and the large-scale impairment in subsequent operations affect the efficiency and long-term development of enterprises.However,in the operation of the capital market,the enterprise management is still willing to pay excessive premium and undertake large amount of merger goodwill for enterprise mergers and acquisitions,which represents that mergers and acquisitions are affected by irrational factors.On the one hand,as the management of listed companies generally has the characteristics of shrewdness,knowledge and rich experience,and its central leadership position in the company makes it deeply influenced by the illusion of control in the business decision,it is easy to have overconfidence.On the other hand,due to the existence of information asymmetry,the overconfident management excessively relies on their own subjective judgment to overestimate the development potential of the merged enterprise and pays more than the actual value of the merged enterprise to complete the merger.Therefore,from the perspective of irrational decision-making of management,it is of great significance to seek measures to reduce the high premium of m&a transactions,and to explore the influence of overconfidence of management on m&a goodwill,so as to improve m&a performance and future business performance and promote the steady development of enterprises.At the same time,as an important way of corporate financing,debt financing can restrain the management's financial freedom and further constrain the management's business decisions due to its characteristics of regular repayment of principal and interest,large financial risks and limited use scope.Therefore,this paper adds debt constraint as a moderating variable to further study the effect of debt on the relationship between management overconfidence and m&a goodwill.Firstly,this paper summarizes the research status of management overconfidence,m&a goodwill and debt constraint according to the previous research literature of scholars.Based on the theory of high echelon,behavioral finance,information and asymmetry,this paper analyzes the influence of management overconfidence on the goodwill of m&a.Then,according to the debt management theory and the free cash flow theory of the enterprise,the debt constraint on the management overconfidence and mergers and acquisitions goodwill relations in theory to clarify the role of the regulation,and then put forward the four assumptions of this paper.Finally,this paper takes the a-share listed companies with newly acquired goodwill of mergers and acquisitions in Shanghai and shenzhen stock exchanges from 2009 to 2018 as research samples,and conducts empirical research by constructing A linear regression model,respectively testing the four research hypotheses proposed in this paper.Through theoretical and empirical analysis,this paper draws the following conclusions :(1)there is a positive correlation between management overconfidence and the size of m&a goodwill;(2)after the introduction of debt constraint,debt constraint can restrain the positive correlation between management overconfidence and m&a goodwill to some extent;(3)after distinguishing the debt constraints of different maturities,it is found that short-term debt has a greater inhibitory effect on the relationship between the two than long-term debt;(4)according to different sources,the adjustment effect of liabilities is tested respectively,and it is found that commercial credit loan has a greater constraint on the two than bank loan.Based on this,this paper puts forward five Suggestions: first,establish the learning training and continuing education mechanism for senior managers,and strengthen the professional quality and cognitive ability of the management;Second,improve the internal governance mechanism of the company and reasonably empower the management;Third,the establishment of a scientific merger and acquisition evaluation mechanism to restrain the management blind merger and acquisition;Fourth,the rational allocation of debt ratio and debt structure,improve the management decision-making level;Fifth,control the huge gap in management compensation and avoid excessive concentration of management compensation.