The Empirical Research Of Listed Company Managerial Overconfidence On The Merger Performance

M&A has become one of the important ways of gaining resources and rapidlyexpanding. With the further improvement of China’s capital market, the executives oflisted companies of China also implement a large number of M&A. In recent years,M&A have increased year by year and M&A amount repeatedly break records.Because increasingly rising wave of mergers and acquisitions, domestic andforeign scholars study a large number of M&A activity. The existing researches aredivided into two categories. One is the traditional method: corporate managersimplement M&A strategies under the effective capital market, and the purpose is tomaximize shareholders’ interests. The other is study the influence of limitedrationality of managers on M&A decision-making through behavioral financeperspective. However, a large number of facts indicate that the M&A did not bring aperformance improvement for listed companies. Because of remarkable differenceswith traditional research methods, Scholars challenged traditional research methods.In recent years, some scholars applied behavior, psychology to financialdecision-making, and create the behavioral finance, which gives a more reasonableexplanation on the reason that low M&A performance through over M&A byexecutives of listed companies.Roll’s arrogant hypothesis is the first paper to explain M&A performance fromthe perspective of managers’overconfidence. He believes that because of managersare overconfident in the M&A, they overestimate the merger performance andprovide over-high acquisition price to the target company. However, the fact is thatseems M&A did not bring to the performance improvement for enterprise. Along itslogic, this article discusses the M&A performance of overconfident managers frommanagers’overconfidence angle. The paper selects the 2007-2009 issue of the A-share listed companies’mergersand acquisitions data as the study sample, uses stock holdings to measureoverconfidence of the executives of listed companies, study the M&A performance byaccounting research. This thesis mainly selects the return on total assets, earnings pershare, operating margin, sales net profit margin to measure merger performance. Inaddition, the article compares the performance after the merger of state andnon-state-owned enterprises, and also compares the performance after the merger inthe free cash flow of more and fewer mergers and acquisitions.The thesis is divided into six parts. The first chapter is introduction, mainlyintroduces the background, significance, innovation, research ideas and methods, aswell as the paper’s research framework. The second chapter is literature review, itsystematically summarizes and comments on the research of domestic and foreignscholars. The third chapter is the theoretical analysis and assumptions, it builds thethesis theoretical framework map and put forward four hypotheses of this article. Thefourth chapter is the empirical research part, it introduces paper’s samples and datasources, selects appropriate indicators to measure the independent variables andcontrol variables, and builds a regression model. The fifth chapter is the empiricalresearch, uses descriptive statistics, correlation analysis, regression analysis methodto do an empirical test of the hypothesis, and uses comparative research thesis tostudy a comparative study of three assumptions. Finally, from the perspective ofinvestors, shareholders, government departments, it explains the relevant policy,applies to reality, has some guidance on M&A performance to improve. Meanwhile, itpoints out the limitations of this study and the future direction of development.Paper draws the following conclusions. (1) Managers in M&A decision-makingprocess in China’s listed companies are overconfident, managers overconfidence onM&A performance have a negative impact. Overconfident managers to theimplementation of the post-merger financial performance is low, and lowover-confident managers after the merger the company’s financial performance ishigh. (2) In overconfident managers of enterprises, private enterprises’M&Aperformance is higher than state-owned enterprises’. (3) In the over-confidentmanagers of listed companies, when the company has more free cash flow, it has lower post-merger financial performance.