Study Of Managerial Over-confidence Influences On M&A Effects

Corporate acquisitions have been an important way of enterprises’ capital operation.Managers play an important role in M&A decision. Behavioral finance believe theory thatthe managers are not rational, and are easy to be influenced by over-confidence and otherpsychological factors when they decide to have an acquisition. Therefore, it is ofsignificance to do research on the influence of managerial overconfidence on the effects ofmergers and acquisitions.Firstly, from the perspective of the overconfidence of managers, based on thebehavioral corporate finance, the analysis of research status at home and abroad tounderstand the current scholars for managers overconfidence and effects of M&A researchdynamic, combined with the overconfidence theory and principal-agent theory, it analyzesthe present situation of China’s listed company M&A.Secondly, we examine how managerial overconfidence impact the effects of mergersand acquisitions in short term and long term useing the companies of Shanghai stockmarket happening M&A as samples. In short-term M&A effect, using the overconfidenceand non-overconfidence in two independent samples for comparison, the results show that:compared with non overconfidence enterprises in short term, managerial overconfidenceget negative cumulative abnormal return after mergers and acquisition, also, it meansM&A brings negative effects to the overconfidence enterprises; In long-term M&A effect,construction of index system for the financial indicators, it uses factor analysis to evaluatethe long-term effect of M&A, after that, it uses multiple regression between managerialoverconfidence and long-term M&A effect, this study shows that, there is an inverted-Urelationship between managerial overconfidence and the effect of M&A by Financialindex method, within a certain range, the higher level of confidence, the better effect ofM&A, and it can brings positive effect. But beyond a certain critical point, the higher thedegree of confidence, the more easily lead to decrease positive effect and make a negativeeffect to enterprise value. Finally, it puts forward specific suggestions and solutions according to the studyresults. The purpose of this paper is to study managerial overconfidence affecting theenterprise M&A effect from the behavioral finance theroy, it helps develop the traditionalfinancial theory. At same times, the conclusion of this paper offers empirical evidence ofpsychological deviation of overcome and correction for managers making M&Adecisions.