Study On The Effect Of Managers’ Overconfidence And M&A Experience On M&A Performance

In modern economic situation, enterprises often carry out mergers andacquisitions (M&A) in order to obtain faster and better development. Especially theenterprises in manufacturing industry carry out more M&A activities. Why do somany enterprises tend to carry out M&A activities? This is because through M&Aactivities, companies can not only expand the operation scale, increase market share,enhance corporate reputation, but also get ample and cheap raw materials, lower costand advanced production technology. However, after scholars such as Meeks (1997)generally found that after certain M&A activities, the economic benefits of enterprisesfailed to improve at a certain extent, and sometimes became even worse.What are the reasons that leading to the unsatisfactory enterprise performanceafter M&A activities? Some researchers such as Doukas and Petmezas (2006) pointedout that the manager’s overconfidence had a close relationship with this.Overconfidence is a psychological bias, the managers that have this psychologicalbias tend to overestimate the accuracy of information that obtained by themselves andthe integration capability of themselves, and thus lack of caution in the process ofM&A activities, finally led enterprises into defeat. Are there any ways to improve thissituation? Some scholars such as Anand and Khanna(2000) found that M&Aexperience of managers can improve performance after M&A activities in the shortterm. Behavioral learning theory suggests that M&A experience can not only helpcompanies choose the right target companies and make accurate positioning, but alsomake enterprises more clear about what is the key link in the M&A activities, and enhance M&A effective integration capacity. When enterprise managers have awealth of M&A experience, they can be more cautious in the next M&A activity, andultimately improve the efficiency of M&A activities by summing up the M&Amatters in the past and summarize the valuable M&A experience.After the2008financial crisis, what is the situation of M&A activities of thelisted companies especially in the manufacturing industry? What is the relationshipbetween managers’ overconfidence and performance after M&A? Is M&Aexperience of the managers still able to make enterprise performance after M&Aturnaround? We need to combine the new economic situation in order to answer theabove questions.In this paper, after reading a large number of domestic and foreign literatures, wesorted out related content about managers’ overconfidence, M&A experience andM&A performance. And we teased out the relationship between overconfidence andM&A performance, M&A experience and M&A performance and make analysis ofthe factors that had an influence on M&A performance. Finally, we proposed theregulating role of M&A experience in the relationship between overconfidence andM&A performance. On this basis, we selected2008to2010in Shanghai andShenzhen A-share listed companies in the manufacturing industry for the studysample. After the selection of variables, the building of model, correlation andregression analysis, we got the following conclusions:(1) managers’ overconfidenceand M&A performance had a negative relationship;(2) managers’ M&A experienceand M&A performance had a positive relationship in short-term;(3) the managers’M&A experience had an influence on the relationship between overconfidence andM&A performance, and the M&A performance of overconfident managers that hadmore M&A experience became less satisfactory.The significances of this study are enriching the managers’ overconfidencetheory, and exploring the regulating role of managers’ M&A experience in the relationship between overconfidence and M&A performance, while giving thecompany’s senior managers enlightenment that before making major decisions theymust be vigilant. On the one hand, they should try to recognize themselves, correctattitude and avoid overconfidence psychological bias. On the other hand, they shouldalways focus on learning, sum up experiences and lessons learned seriously, makeefforts to improve work efficiency and create more economic benefits.