Influence of Cognitive Distortions on Corporate Takeovers on Russian Market

This work covers the influence of cognitive distortions, namely CEO's overconfidence and availability bias, on M&A effectiveness, whose total amount reached $3,5 trillion in 2017. Besides, we structured and analysed the results of the previous works, studying euristic mistakes phenomena, we systematized the methods of their estimation, among which we selected the most suitable and representative ones for the following empiric analysis. We chose the model for researching the dependence of M&A effectiveness on CEOs' cognitive mistakes and, finally, estimated the corporate management mechanisms which can minimize them. We confirmed that CEO's overconfidence has a negative effect on cumulative abnormal returns, whereas availability bias, on the contrary, makes executive directors address risk estimation more critically and comprehensively. The most important result of this study is the fact that board of directors gender differentiation, the share of independent directors and the level of information transparency of the company help to offset the effect of cognitive distortions, while cumulative size of the board, on the contrary, has a positive influence on the probability of ineffective M&A realization. It can be explained by the fact that its growth usually happens at the expense of CEO's subordinates who accept their position, so strategic decisions are collective from a naive perspective, but are individual de facto.