Research On Manager Overconfidence,VAM Agreements And Financial Risks Of M&A

With the continuous development of China’s market economy,a large number of enterprises participate in mergers and acquisitions in order to develop and grow,but most of the mergers and acquisitions activities not only do not bring synergy to both parties,but also hinder the operation of enterprises,resulting in a decline in market competitiveness,incurring financial risks of mergers and acquisitions,and even making enterprises fall into financial difficulties.Therefore,managers should pay attention to the negative effects of mergers and acquisitions on enterprises,take measures to prevent,and avoid risks as much as possible,especially under the wave of mergers and acquisitions in China,how to reduce the financial risks in mergers and acquisitions and achieve a win-win situation for both parties has become an urgent task for listed companies.As the main body of corporate decision-making,how will managers affect the financial risk of mergers and acquisitions? Based on this,this paper explores the impact of the psychological characteristics of management overconfidence on the pecuniary risk of M&A from the perspective of behavioral finance.In addition,the popularity of mergers and acquisitions continues to increase while the problem of information asymmetry also appears,in order to alleviate this phenomenon,VAM agreements came into being,but the performance targets contained in the VAM agreement may also bring financial risks to the company,and managers who show overconfidence characteristics will also affect the signing of VAM agreements,so what is the relationship between the three? In this paper,this paper incorporates the three into the same research framework to study the links between managers’ Overconfidence,VAM agreements and M&A financial risks.Firstly,the various theories and specific literature used in the article are sorted out in detail;Secondly,on the basis of existing research,hypotheses are proposed and models are constructed.Then,the data of listed companies released by Shanghai and Shenzhen A-share M&A activities from 2015 to 2021 in China was used as a sample for empirical testing,and the hypotheses were verified through descriptive statistics,correlation analysis and regression analysis,and finally the robustness test was done to ensure the accuracy of the results,and finally the following conclusions were drawn:(1)overconfident managers will bring greater financial risks to M&A;(2)Managers are more inclined to sign VAM agreements when they are overconfident;(3)The signing of a VAM agreement will increase the financial risk of M&A of an enterprise,that is,the VAM agreement plays an intermediary role in the overconfidence of managers and the financial risk of M&A.Through the analysis and research of the relationship between the three,it provides reference ideas for enterprises to standardize M&A decisions,give full play to the advantages of VAM agreements and prevent M&A financial risks.