Title: Managerial overconfidence and M&A performance: evidence from China

Authors: Jie Michael Guo; Qian He; Jiayuan Xin; Jia Liu

Addresses: Durham University Business School, Durham University, Mill Hill Lane, Durham, DH1 3LB, UK ' Durham University Business School, Durham University, Mill Hill Lane, Durham, DH1 3LB, UK ' Newcastle University Business School, Newcastle University, 5 Barrack Rd, Newcastle upon Tyne NE1 4SE, UK ' Salford Business School, University of Salford, Salford, M5 4WT, UK

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 2006-2012. The empirical results show that Chinese acquirers gain value in both the short-run and the long-run after the M&A announcement. Our study provides new evidence that the market responds favourably 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.

Keywords: mergers and acquisitions; M&As; market performance; managerial overconfidence; Chinese market; China.

DOI: 10.1504/IJBAAF.2020.107946

International Journal of Banking, Accounting and Finance, 2020 Vol.11 No.3, pp.342 - 360

Accepted: 10 Oct 2018
Published online: 07 Apr 2020 *

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