Research On The Causes And Consequences Of High Premium Mergers

In recent years,mergers and acquisitions frequently occur in the capital market,the number of mergers and acquisitions is increasing,the scale of mergers and acquisitions is also increasing.Mergers and acquisitions completed by paying too high a premium are known as the "winner’s curse",and Chinese and foreign scholars have been arguing about the origin of this "curse".And because the acquirer pays too high a deal price,its goodwill asset surges,brings a series of hidden trouble.Once the target party’s performance commitment cannot be realized,the huge impairment of goodwill will cause serious economic consequences to the listed company.This phenomenon indicates that there are irrational factors in the process of MERGER and acquisition,which have an impact on the transaction activity of merger and acquisition.Therefore,this paper focuses on the question of "what are the irrational factors driving the high premium merger and acquisition" to further explore and study.This article takes multiple mergers and acquisitions of Golden Shield shares as the research object,and analyzes the cases to study the formation path and economic consequences of high-premium mergers when management overconfidence is the main reason for high-premium mergers.The conclusions of the study are as follows:(1)Managers with too much confidence in the acquier tend to fall into the judgment of extreme optimism,overestimate the synergies and future investment returns,and underestimate the high risk of the acquired company’s performance commitment level,which ultimately leads to the unreasonable price paid in the m&a transaction;(2)At the same time,when the over-confident managers of the acquirer dominate diversified M&As,due to the different industries of the parties to the merger,the increase in information asymmetry causes managers It is easier to lack information collection,and it is not easy to detect the risk of high performance promises of the target company,so it is easier to accept high performance promises and make more risky decisions,which further aggravates the influence of managers on M&A premiums;(3)High-premium M&A It will cause the initial measurement of goodwill to be too high and increase the risk of goodwill impairment.When the target company fails to achieve performance,it will cause goodwill impairment,which will bring serious economic consequences to the listed company.On the one hand,it will cause the company’s financial performance.Shortages,falling profits or even losses.On the other hand,in the secondary stock market,the negative information disclosure of "devaluation" and "explosive thunder" made small and medium investors lose confidence in the company,and ultimately caused the company’s stock price to fall.In view of the research conclusion,this paper puts forward relevant Suggestions on the acquirer company,relevant institutions and small and medium investors respectively.In particular,it puts forward some Suggestions on perfecting the risk assessment mechanism,perfecting the internal control system and setting up the decision-making committee of merger and acquisition.