The Impact of Corporate Managers' Overconfidence on Corporate Mergers and Acquisitions: A Case Study of Gree's Acquisition of Zhuhai Yinlong

Abstract

There is an important research topic in behavioral finance: overconfidence. This paper studies the relationship between overconfidence and Merger and Acquisition decision-making from the perspective of managers' irrationality. This paper adopts the case study method, selects Dong Mingzhu of Gree Electric Appliances, an enterprise manager with a distinctive personality, and takes Gree's merger and acquisition of Zhuhai Yinlong as an example to explore and analyze how overconfidence affects the enterprise's merger and acquisition behavior and to further explore the reasons behind its merger and acquisition results. From the perspective of overestimating the value of M&A targets and adopting aggressive debt financing strategies, this paper analyzes how overconfident managers make irrational decisions in the M&A process. Finally, through the phenomenon that the actual situation of Zhuhai Yinlong did not reach Dong's valuation and the unfair financing scheme in the acquisition plan, it is concluded that the overconfident managers overestimated the value of the M&A target.