The Influence Of Managerial Overconfidence On The Performance Of Cross-border Mergers And Acquisitions Of Chinese Listed Companies

Since the global financial crisis in 2008,the number and scale of overseas mergers and acquisitions of Chinese enterprises are showing a trend of rapid growth.But the report of research institute shows that the performance of Chinese enterprises overseas mergers and acquisitions is not satisfactory.Less than 20% of enterprises are in a state of profitability.There is a paradox between the rising tide of cross-border mergers and acquisitions and the dismal performance of mergers and acquisitions.However,there are some limitations in the interpretation of cross-border mergers and acquisitions,Scholars began to explain the cross-border M&A activity with the overconfidence theory in behavioral economics.They proved that managerial overconfidence is one of the causes of cross-border M&A activities by empirical research.So,what is the relationship between managerial overconfidence and cross-border M&A performance? Whether managerial overconfidence is one of the reasons for the low performance of cross-border M&A is still to be verified.By summarizing the relevant research literature,we find that the scholars pay more attention to the relationship between managerial overconfidence and domestic M&A.However,there is less research on the relationship between managerial overconfidence and the performance of crossborder M& A.At the same time,when managers make the decisions of cross-border M&A,they will be affected by the internal resources of the enterprise,Then the enterprise free cash flow is an important internal resources of the enterprise,its impact on the performance of cross-border mergers and acquisitions,and its influence on the relationship between overconfidence and cross-border mergers and acquisitions performance can’t be ignored,Therefore,this paper studies the crossborder mergers and acquisitions,which based on the existing theories.In this paper,we select the 137 events of overseas mergers and acquisitions from 2008 to 2014,as the sample of the study,it is 111 listed companies in Shanghai and Shenzhen stock markets.We use the change of managerial shareholding as an alternative variable of managerial overconfidence.We choose the change of the operating profit rate and the total return on assets in the year before and after the cross-border mergers and acquisitions as a measure of the performance of cross-border mergers and acquisitions.Furthermore,a regression model is established to verify the relationship between managerial overconfidence and cross-border M&A performance.In addition,this paper makes a comparative study on the merger and acquisition performance of state owned enterprises and non-state owned enterprises.In addition,this paper also makes an empirical study on the impact of free cash flow on the performance of cross-border mergers and acquisitions,and the moderating effect of free cash flow on the relationship between overconfidence and cross-border M&A performance.Through empirical research,the following four conclusions are drawn in this paper:(1)Managerial overconfidence is negatively correlated with the performance of cross-border mergers and acquisitions of listed companies in China.(2)Compared with private enterprises,the negative relationship between managerial overconfidence and the performance of cross-border M&A of state-owned enterprise is stronger.(3)There is a significant negative correlation between the free cash flow and the performance of cross-border mergers and acquisitions of listed companies in China.(4)Free cash flow of a company is more abundant,the negative relationship between managerial overconfidence and the performance of cross-border M&A is stronger.