Executive Overconfidence and Performance of Corporate Cross-border Mergers and Acquisitions

Abstract

With the implementation of “Belt and Road Initiative”, Chinese companies have accelerated their pace of internationalization, for which cross-border merger and acquisition (M&A) activity has become a major strategic tool. This paper investigated the impacts of executive overconfidence on cross-border M&A performance by taking a sample of 424 cross-border M&A cases launched by China’s Shanghai and Shenzhen A-share listed companies from 2008 to 2017. OLS regression results showed that executive overconfidence undermined both short-term and long-term cross-border M&A performance, especially when the acquiring company was not state-owned and when the target was located in a developed or non-BRI country. Executive overseas background was found to play a positive moderating role in the correlation between executive overconfidence and short-term cross-border M&A performance. This study provided some practical implications on corporate governance and talents hiring policies, especially for companies that are enthusiastic about cross-border mergers and acquisitions.