The Empirical Research About The Managerial Overconfidence On The Merger Performance In Listed Companies Of Our Country

The study researched how managerial overconfidence affects M&A performance in listed companies of our country between 2006 and 2008, and I researched on Hubris Hypothesis proposed by Roll(1986) ,he considered that mergers often overestimate the target company value in spite of the target company isn't valuable in fact just because of they are overoptimistic and overconfidence. I use the frequency of mergers the manager engaged during the tenures proposed by Doukas and Petmezas(2007),the premium of mergers proposed by Antonious, Arbour and Zhao(2008) as the proxy variables of managerial overconfidence, also I adjust them to adapt to our companies samples. According to these two variables I divided the whole samples into two groups and compared the performance of the non-overconfidence samples with the overconfidence samples by descriptive statistics. Then I did the regression analysis in whole samples to test the relation between managerial overconfidence and M&A performance. The proxy variables of M&A performance divide into two groups, one group is the stock abnormal return as the short-term M&A performance proxy variable, the other group is long-term performance proxy variable, From the company profitability, shareholders profitability, free flows of cash and development ability, the variables are return on total assets, return on equity, cash flow ratio and increasing rate of income.The results show that comparing with the samples of the non-overconfidence managers, there is significantly positive less stock abnormal return for the overconfidence managers in short-term. The long-term performance proxy variables in all the samples almost show a bad return except cash flow ratio, especially the company profitability in the overconfidence sample is significantly less than the non-confidence simple. The regression analysis results show us the managerial overconfidence is significantly harmful to M&A performance, and the company size free cash flow and the corporate governance level also affect the M&A performance. With this confirmed inclusion we advance five suggestions and methods to restrict managerial overconfidence and bring some help to the corporation governance.The paper has five main parts,they are introduction, article review, research design, analysis on results and conclusion. The research design and analysis are the most important parts. By the different proxy variables of overconfidence I divided the samples into two parts, then I went on the descriptive statistics analysis and the regression analysis to verify the relationship between managerial overconfidence and M&A performance. In the last of paper, I advanced some policies and suggestions in order to combine the inclusion and applications, then raise some deficiencies and improvements in this paper.