Management's Overconfidence,asymmetry Information And Value Adjustment Mechanism

With the continuous development of China's economy and the improvement of the capital market,merger and acquisition have become a common way for enterprises to expand and grow.With the rise of this transaction form,VAM are increasingly used in merger and acquisition transactions,becoming one of the basic characteristics of enterprise merger and acquisition.The measures for the administration of material assets reorganization of listed companies issued by the CSRC in November 2014 allows non-affiliated merger and acquisition parties to negotiate and sign a c VAM on their own,removes the threshold for equity purchase,and returns the right to negotiate whether to use VAM in material assets reorganization to the merger and acquisition parties on their own.Firstly,this paper uses the literature research method to sort out and analyze the asymmetry information existing in the merger and acquisition of enterprises by domestic and foreign scholars as well as the overconfidence of executives.Secondly,by sorting out the basic concepts and influencing factors of senior executives' overconfidence and the development process of Valuation Adjustment Mechanism in China,this paper analyzes a series of theoretical results and puts forward the research hypothesis of this paper.Thirdly,this paper conducts an empirical study on a-share listed companies with non-related major restructuring events disclosed in the Shanghai and Shenzhen stock exchanges between January 1,2015 and December 31,2018.Based on asymmetric information risk of mergers and acquisitions,including adverse selection problems in the process of merger and acquisition,leading to risk asset mispricing and low efficiency,and moral risk after the completion of merger and acquisition,leading to integration risk,this paper argues that Valuation Adjustment Mechanism can reduce through mergers and acquisitions both sides of the degree of information asymmetry and weaken the merger and acquisition risk.The paper put forward that in cases with more severe asymmetry information,value adjustment mechanism is more inclined to be used.By logistic regression analysis,this paper found that cross-industry mergers tend to use value adjustment mechanism.Based on related theory of executive overconfidence,overconfidence executives tend to underestimate the risk of merger and acquisition and therefore underestimate the function of value adjustment mechanism in this respect.On this basis,this paper argues that there is a negative correlation between executives' overconfidence and the use of value adjustment mechanism.By logistic regression analysis,this paper found that overconfident executives are less inclined to use value adjustment mechanism.Finally,based on the above conclusions,this paper puts forward corresponding Suggestions.