A Study On The Impact Of CEO Overconfidence On M&A Performance

As a core manager,the CEO can influence important corporate decisions,but little research has been conducted on the impact of CEO overconfidence on corporate M&A performance.Therefore,clarifying the relationship between CEO overconfidence and M&A performance and the boundaries of its effects is of great significance for improving corporate M&A performance and improving the internal corporate governance mechanism.This paper examines the impact of CEO overconfidence on corporate M&A performance and the moderating effects and interactions of internal and external experience and motivated executives based on top echelon theory,executive team behavioural integration theory and organisational learning theory,using the M&A events of A-share listed companies from 2012 to 2020 as a sample.The empirical study found that:(1)CEO overconfidence adversely affected long-term M&A performance and had no significant effect on short-term M&A performance;(2)internal and external experience and competent executives mitigated the adverse effect of CEO overconfidence on long-term M&A performance;(3)in the context of CEO lack of professional experience,the moderating effect of external experience on the relationship between CEO overconfidence and long-term M&A performance was(3)the mitigating effect of external experience on the relationship between CEO overconfidence and long-term M&A performance is more significant in the context of CEO lack of professional experience,suggesting a substitution effect between internal and external experience;(4)competent executives are able to play the role of team checks and balances,weakening the negative impact of CEO overconfidence on long-term M&A performance;(5)the impact of CEO overconfidence on M&A performance differs significantly across firm life cycles.The adverse impact of CEO overconfidence on long-term M&A performance is more significant for firms in the growth and maturity stages due to capital shortage and strong desire for market expansion;(6)in the heterogeneity analysis,the adverse impact of CEO overconfidence on long-term M&A performance is more significant for non-state,offensive strategy and low investment efficiency firms;(7)external M&A experience plays a significant role in CEO overconfidence moderating role in the effect of CEO overconfidence on firms’ long-term M&A performance may be through the experiential learning path rather than the competitive pressure path,validating the feasibility of peer M&A frequency to characterize external M&A experience.The findings help deepen the understanding of the adverse effects of CEO overconfidence psychology and provide lessons and suggestions from the perspective of organizational learning and executive team checks and balances.