Managerial Overconfidence and M&A Performance: Evidence from China

Guo, M.; Liu, J.; He, Q.; Xin, J.Y.

Abstract

We examine the extent to which managerial overconfidence creates value to acquirers in successful M&As undertaken by Chinese listed firms in the period of 20062012. The empirical results show that Chinese acquirers gain value in both the shortrun and the longrun after the M&A announcement. Our study provides new evidence that the market responds favorably to M&A deals undertaken by acquirers with more managerial overconfidence in both the short run and the long run. Our multivariate analyses, however, show that managerial overconfidence has a minimal role in explaining the stock price movement. In addition, we find that firm size is an important determinant for the relationship between overconfidence and market reaction to merger deals. Taken together, we conclude that managerial overconfidence has little effect in driving merger and acquisition deals in China.

Citation

Guo, M., Liu, J., He, Q., & Xin, J. (2020). Managerial Overconfidence and M&A Performance: Evidence from China. International Journal of Banking, Accounting and Finance, 11(3), 342-360. https://doi.org/10.1504/ijbaaf.2020.10028269

• Journal Article Type: Article
• Acceptance Date: Oct 1, 2018
• Publication Date: 2020
• Deposit Date: Oct 8, 2018
• Publicly Available Date: Apr 7, 2021
• Journal: International Journal of Banking, Accounting and Finance
• Print ISSN: 1755-3830
• Electronic ISSN: 1755-3849
• Publisher: Inderscience
• Peer Reviewed: Peer Reviewed
• Volume: 11
• Issue: 3
• Pages: 342-360
• DOI: https://doi.org/10.1504/ijbaaf.2020.10028269
• Keywords: Mergers and Acquisitions; Market Performance; Managerial Overconfidence; Chinese Market
• Public URL: https://durham-repository.worktribe.com/output/1317375