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Managements' corporate growth beliefs and M&As – Evidence from China

Author

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  • Yue, Sishi
  • Wu, Keke
  • Dong, Dayong

Abstract

The beliefs held by decision-makers affect their economic behavior. Do beliefs in corporate growth held by listed companies’ management teams affect their execution of mergers and acquisitions (M&As)? We use M&A event data for Chinese Shanghai and Shenzhen A-share listed companies from 2014 to 2021. Words (phrases) related to capital operations in listed companies’ site visit summary reports are employed as a proxy variable for the beliefs in corporate growth held by the management of these companies. We explore the relationship between managers’ beliefs in corporate growth and their M&A activities. The results indicate that the stronger are managers’ beliefs in corporate growth, the more likely these managers are to expand through M&A activities, the more willing they are to pay a premium in M&As and the better their M&A performance is. In addition, beliefs in corporate growth impact the goodwill generated from M&A activities. We provide new empirical evidence from an analysis of the nonrational factors underlying M&A activities.

Suggested Citation

  • Yue, Sishi & Wu, Keke & Dong, Dayong, 2023. "Managements' corporate growth beliefs and M&As – Evidence from China," The North American Journal of Economics and Finance, Elsevier, vol. 68(C).
    • Handle: RePEc:eee:ecofin:v:68:y:2023:i:c:s1062940823000955
    DOI: 10.1016/j.najef.2023.101972
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    Keywords

    Managements; Corporate growth beliefs; M&A; Site visit;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • G40 - Financial Economics - - Behavioral Finance - - - General

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