Research On The Impcat Of Executive Reputation On Corporate M&A

For a long time,corporate mergers and acquisitions have always been the research hotspot and focus of the company's strategic field.For enterprises,mergers and acquisitions is an important strategic decision-making behavior of enterprises.Through mergers and acquisitions,they can quickly achieve scale expansion and business diversification.In 2018,global M&A transactions amounted to 4 trillion US dollars,up 19% from 2017,and the number of M&A transactions reached 47,000.Corporate mergers and acquisitions became more frequent.Scholars have studied the motivations of managers to initiate mergers and acquisitions.Initially,scholars believed that managers engaged in mergers and acquisitions in order to maximize corporate value and shareholder interests,and achieve synergies in business operations through mergers and acquisitions.However,scholars later found that in the case of the separation of company ownership and management rights,shareholders often lack effective supervision of managers,which leads to agency problems.Managers may also initiate mergers and acquisitions for the purpose of building a corporate empire,increasing their salaries,etc.,or abandon mergers and acquisitions opportunities for risk avoidance considerations,thereby damaging the company's value and shareholders' interests.Therefore,scholars began to study which governance mechanisms can form effective incentives and constraints for managers,inhibit managers' private interests in mergers and acquisitions,and increase the value of mergers and acquisitions.As an important asset of managers,reputation can exert governance and resource effects,and has an important impact on corporate mergers and acquisitions.On the one hand,previous studies have found that reputation can solve the principal-agent problem under long-term game when managers' behavior cannot be effectively observed,and encourage managers to maximize the value of the enterprise and the interests of shareholders when making investment decisions,and has a governance effect;On the other hand,reputation as a dominant market signal mechanism can improve the ability of managers to obtain resources,such as easing corporate financing constraints to provide sufficient financial support for mergers and acquisitions,or obtaining information through their own social networks to reduce the degree of information asymmetry on the process of mergers and acquisitions,and has a resource effect.No matter whether the governance effect or the resource effect will affect the M&A,there are still few studies on the relationship between the reputation of the executive and the M&A,especially in the social background of China where face and relationships are valued.In this case,managers' career development plays a vital role,and it is worthy of full research and discussion on this topic.Taking the M&A events of listed companies in China as a sample,this paper selects three key links in M&A,and studies the relationship between executive reputation and M&A(M&A decision,M&A premium and M&A performance).Specifically,this paper mainly solves the following problems:(1)What is the relationship between executive reputation and corporate mergers and acquisitions? Can reputation motivate executives to initiate mergers and acquisitions,reduce mergers and acquisitions premiums,and improve M&A performance?(2)What mechanism does executive reputation affect corporate mergers and acquisitions? Specifically,does the reputation of executives ease the financing constraints faced by enterprises and provide sufficient financial support for mergers and acquisitions,thereby increasing the possibility of mergers and acquisitions? Does the reputation of the executives reduce the degree of information asymmetry between the M&A and the target companies,thereby reducing the M&A premium?(3)What factors affect the relationship between executive reputation and corporate mergers and acquisitions? Specifically,whether the career stage of executives,the nature of property rights of acquirer,and the external manager market influence the relationship between executive reputation and corporate mergers and acquisitions?In order to solve the above problems,based on relevant theories and literature research,using the M&A events of China's A-share listed companies as a sample,this paper uses the event research method to empirically test the above problems.The main conclusions of this paper are as follows:(1)The reputation of executives is positively related to M&A decisions,and this shows that executives with high reputations are more likely to initiate mergers and acquisitions.In the early stage of their careers,executive reputation has a stronger positive impact on M&A decisions,and mainly because in the early stage of career,executives are more radically invested.In non-state-owned enterprises,the reputation of executives has a stronger positive impact on corporate M&A decisions,and this is because the investment decisions of state-owned enterprises are distorted by administrative intervention and reputation mechanism is limited.Further,the research in this paper finds that when enterprises face larger financing constraints,the reputation of executives has a stronger positive impact on M&A decisions,and this shows that executive reputation can help enterprises ease financing constraints through resource effects and provide sufficient funds for mergers and acquisitions,which enhances the promotion of executive reputation to corporate mergers and acquisitions decisions.(2)The reputation of executives is negatively correlated with the M&A premium,which indicates that executives with higher reputations pay a lower M&A premium in M&A transactions.In the later stages of their careers,executive reputations have a stronger negative impact on the M&A premium,as executives in the later stages of the career have more experience and greater access to information,further reducing the M&A premium.In non-state-owned enterprises,the reputation of executives has a stronger negative impact on the M&A premium,and this may be due to the high agency costs of state-owned enterprises and the difficulty in playing a reputation mechanism under administrative intervention.Further,the higher the degree of information asymmetry between the M&A and the target company,the stronger negative impact of the reputation of the executive on the M&A premium,and this shows that the reputation of the executive can play a resource effect and help the acquirer to reduce the degree of information asymmetry,thereby reducing the M&A premium.(3)The reputation of executives is positively correlated with the performance of mergers and acquisitions,and this shows that executives with high reputation can improve the performance of mergers and acquisitions.In the later stage of career,the reputation of executives has a positive impact on the performance of mergers and acquisitions,and this is because executives in the later stages of career have richer social capital and management experience,which is more conducive to resource integration after mergers and acquisitions.In non-state-owned enterprises,the reputation of executives has a positive impact on M&A performance,and this is because reputation mechanisms can be better played in non-state-owned enterprises.The higher the maturity of external manager market,the stronger positive impact of the reputation of executives on M&A performance,and this is because when the external manager market is relatively mature,managers face more intense competition and will cherish their reputation and strive to improve M&A performance.The main contributions of this article are reflected in the following points.Contribution 1: Expanded the research on the relationship between executive reputation and corporate mergers and acquisitions.Previous studies have paid less attention to the relationship between executive reputation and corporate mergers and acquisitions.Thi a e e he e e e ea ch e h d c d c a c ehe i e a d e ic l study on the relationship between executive reputation and corporate mergers and acquisitions from the three dimensions of M&A decision,M&A premium and M&A performance.It explores the mechanism of the influence of executive reputation on corporate mergers and acquisitions,and enriches the related achievements of the relationship between executive reputation and corporate mergers and acquisitions.At the same time,from the perspective of executive reputation and the research scope of corporate mergers and acquisitions,the research results of this paper further enrich the research on the reputation of executives and the company's strategic decision-making and the related research on the factors affecting corporate mergers and acquisitions.Contribution 2: Theoretical analysis and empirical test of the role of executive reputation in the impact of corporate mergers and acquisitions,enriching the theoretical research on the mechanism of executive reputation.In the past,most of the research on the reputation mechanism of executives focused on the governance effect of executive reputation based on principal-agent theory,but lacked attention to the resource effect of executive reputation.As an important social capital of executives,reputation not only can form effective incentives and constraints for executives,but also bring rich social resources to executives,which will have an important impact on executive decision-making.Therefore,the study of the relationship between executive reputation and corporate mergers and acquisitions should consider both governance and resource effects.Based on the principal-agent theory,combined with resource dependence theory and social capital theory,this paper analyzes the mechanism of executive reputation's influence on corporate mergers and acquisitions from the perspective of governance effect and resource effect,and selects variables to test the relevant action path,further enriching the related study on the reputation theory of executives.Contribution 3: Based on the institutional background of China,the situational research on the reputation of senior executives has been improved.Considering the characteristics of China's corporate system and social culture,this paper constructs a comprehensive evaluation index system of executive reputation and enriches the research on executive reputation evaluation methods.At the same time,this paper examines the influence of career stage,property rights and external manager market on the relationship between executive reputation and corporate mergers and acquisitions,further enriching the research on the research system and the localization of reputation theory.Contribution 4: Based on the research conclusions,put forward policy recommendations to improve corporate governance mechanisms and improve the effectiveness of mergers and acquisitions.The results of this paper show that reputation as an important implicit incentive mechanism can alleviate the principal-agent problem in the long-term game state,and at the same time,it can further enhance the effectiveness of mergers and acquisitions through resource effects.Therefore,this paper puts forward relevant policy recommendations from the aspects of establishing reputation evaluation and incentive mechanism,promoting manager market construction,improving the selection mechanism of state-owned enterprise managers and improving the effectiveness of mergers and acquisitions by means of reputation mechanism,and provides relevant reference for improving China's corporate governance mechanism and improving M&A effectiveness.