Managerial Overconfidence,Value Adjustment Mechanism Compensation Method And Merger And Acquisition Performance

At present,China’s economy has moved from rapid growth to a new stage of high-quality development and the mergers and acquisitions(M&A)market is also showing a positive trend.According to statistics,there are 1893 mergers and acquisitions of listed companies in Shanghai and Shenzhen in 2020,with an amount close to 1.2 trillion yuan and a year-on-year increase of 19.6%.Since the China Securities Regulatory Commission revised the original "Management Measures for the Major Asset Restructuring of Listed Companies" in 2014,the implementation of performance commitments has transitioned from the mandatory stage to the marketization stage.As a valuation adjustment mechanism introduced in mergers and acquisitions and a means to resolve merger risks,Performance commitment has been generally accepted and used by both parties to the merger.With the in-depth research on M&A market phenomena and corporate behaviors,the hypothesis of "rational economic man" is constantly under attack.Behavioral finance theory believes that managers are often affected by both their own psychological factors and the external environment when making M&A decisions and they tend to be overconfident.It is that managers generally have a cognitive bias in M&A activities,which will prompt them to overestimate both their personal decision-making ability and the income of M&A but underestimate potential risks,thereby affecting M&A performance.At the same time,the performance commitment compensation payment method acted as an important arrangement of the performance commitment system is also directly affected by the cognitive ability of managers,which in turn affects the performance of mergers and acquisitions.How the managerial overconfidence improves M&A performance? How does the overconfidence tendency affect the content arrangement of performance promises?Will the influence be transmitted to the performance of mergers and acquisitions through the intermediary effect of performance commitments? The current research on M&A performance does not comprehensively consider the managerial overconfidence and the performance commitment system.Based on the theory of behavioral finance and the theory of equity checks and balances,this paper uses the panel data of 2772 performance commitment cases of Shanghai and Shenzhen A-share listed companies from 2014 to 2019 as a sample to analyze the performance of listed companies in China after using performance commitments.And analyze the relationship between M&A performance and managerial overconfidence and performance commitment compensation.And divide it according to the three compensation methods of performance commitment,then compare the impact of different payment methods on M&A performance at different periods of the merger and further explore performance commitment compensation the method plays a role of mediating effect between manager’s overconfidence and M&A performance.All of the researches aim to enrich existing research and provides suggestions for China’s M&A and restructuring market compliance for the improvement of M&A performance and the improvement of corporate governance.The research results show that managerial overconfidence has a negative impact on M&A performance.Among the performance commitment compensation methods,the two payment methods that include share compensation have better M&A performance compared with a single cash compensation method.Performance commitment compensation methods are in management Managerial overconfidence plays a part of the intermediary role in the negative impact of M&A performance.Managerial overconfidence affects M&A performance by influencing the choice of performance commitment compensation methods.And the two payment methods including share-based payment play a certain inhibitory role in the negative impact between the managerial overconfidence and M&A performance.Based on this,this article believes that the introduction of performance commitments in M&A transactions as a valuation adjustment mechanism is necessary for both reducing the degree of information asymmetry between the parties to the merger and controlling the risks of M&A transactions.Based on the research results and the current status of Chinese M&A and restructuring market,there are some suggestions: systematically arrange the management organization structure,improve the corporate governance system;prudently arrange the content and target definition of performance commitment contracts,set reasonable performance commitment indicators,and control valuation risk throughout Use each link of performance promise in mergers and acquisitions;pay attention to the fluctuation of merger performance during the period of merger performance promise.