The Effect Of Management Risk Attitude And Bargaining Power On M&A Premium

With the continuous improvement of the securities market system and rules,mergers and acquisitions occur frequently in the Chinese market.It has been the core problem of financial theory research.Merger and acquisition involve many links,among which the negotiation of transaction price based on the value of assets is the most difficult to determine,that is,the negotiation and pricing process is the focus of merger and acquisition.In practice,it is difficult to accurately measure the risk preference of managers with data.Therefore,this paper attempts to simulate these differences and the influence of bargaining power on the transaction price based on multi-agent modeling.This paper is based on multi-agent modeling and prospect theory.In the "revenue"part,factors such as the acquirer’s relative risk preference--relative risk aversion,the acquirer’s relative optimism(relative risk preference)--pessimism(relative risk aversion)attitude towards the acquisition event and the bargaining power of the acquirer and the acquirer are considered.Based on the prospect theory and loss aversion theory,the utility of each micro individual enterprise is calculated by constructing 1000 heterogeneous enterprise subjects and simulating merger and acquisition among them.By eliminating the bottom 10%of individuals with the lowest utility and adding new entrants,the system is constantly updated to reach an equilibrium state.Finally,the average merger premium and average merger utility curve are drawn,so as to explore the effects of acquirer’s risk aversion--risk preference behavior and target company’s optimistic--pessimistic behavior,as well as the bargaining power of both sides on the merger price premium and merger utility..The results show that(1)m&a premium is proportional to the relative risk preference of the acquirer and to the relative optimism of the target enterprise.Among them,the relative risk preference of the acquirer plays a dominant role.(2)the lower the risk aversion degree of the overall acquirer of the system is,the more willing the acquirer is to pay a higher price premium of about 50%.Conversely,when the acquirer is absolutely risk-averse,the premium is only 32%.(3)for enterprises with weak bargaining power,that is.when the bargaining incremental interval is below 20%,it is the wisest choice to choose acceptance in the first round.