The Empirical Research About The Effect Of Managerial Overconfidence On The Merger Decision And Performance

Merger and acquisition of companies,as one of the important forms of capital collocation,is also an important measure in realizing capital element circulation and adjustment of industry structure. In 2002,the promulgation and implementation of"Administrative Measures On Acquisition Of Listed Companies"spurs a new round of fulfillment and progress for merger and acquisition of listed companies. Merger and acquisition of companies will be gradually standardized and systemized along with the continual perfection of law system. The managers of companies play a more and more important role in merger and acquisition,thus it is very necessary to make a research about managerial overconfidence to acquisition decision and performance. Especially in recent years,our country is in transition period for a high-speed development and the characteristic of manager's overconfidence is particularly obvious. So the research about the mergers of Chinese companies considering the managerial overconfidence to be applied into will obtain more guiding significance and practical significance.The paper has four main parts. The first part referring to ChapterⅠmainly mentions the introduction of this paper. The second part is composed of Chapter II,Chapter III and Chapter IV and mainly introduces the related theories involved in the paper. Summary on the overconfidence theory in chapter II has laid a solid foundation for following research. Chapter III introduces the theories about merger motivation,elaborately reviewing different kinds of theories about foreign acquisition motivation and briefly surveying the domestic researches on merger motivation. Literature analysis and comments on the performance of company's merger and acquisition are presented in Chapter IV. This chapter summarizes empirical analysis which utilizes event study and financial index method at home and abroad in detail and further evaluates the applicability of both methods getting the conclusion that event study is the appropriate method for the study if concerning performance of merger and acquisition in China. The third part,including Chapter V and Chapter VI,is the core part of the paper.Chapter V is the introduction of the merger theory model of companies with overconfident managers. Chapter VI is the empirical part in this paper. Be based on the finance viewpoint of behavioral corporation , an empirical research about the managerial overconfidence in Chinese listed company to acquisition decision and its performance is carried on with company samples listed between 2003 and 2006 in Shanghai Stock Exchange. The conclusion shows that the manager's overconfidence is strongly positive relativity with the acquisition decision and strongly negative relativity with the acquisition performance. In other words,managerial overconfidence is an important cause leading to merger activity and has significant influence on merger performance.The last part of this paper includes ChapterⅧ. In this chapter,based on conclusions of the empirical study from the second part,we give some policy proposals on how to supervise the manager's overconfidence. Moreover,we look forward to the research for the future on this topic.