The Impact of CEO Overconfidence on M&A Deals Performance: Evidence from US

Student: Sycheva Anastasiia

Educational Programme: Strategic Corporate Finance (Master)

Year of Graduation: 2020

This study examined questions about the impact of CEO overconfidence on the M&A deals performance in the USA market. The motivation of creating this study is to find answers to three questions: What is the impact of CEO overconfidence on the effectiveness of M&A deals? How to neutralize the negative impact? How to assess the CEO overconfidence? For answering these questions, an analysis was conducted in the following areas: the impact of the CEO overconfidence on various aspects of corporate finance; the impact of the CEO overconfidence on the M&A deals performance; methodologies for assessing the CEO overconfidence and M&A performance. «Bag of Words», «Options contracts» (for assessing self-confidence), and the Concept of abnormal return (for assessing M&A performance) were selected as the methodologies for evaluating CEO overconfidence and M&A performance. The sample consists of 864 deals that were conducted in the USA in the period between 2002 and 2019. 3 out of 5 hypotheses were confirmed. The CEO overconfidence has a negative impact on the M&A deal performance (for the high-tech deals the same effect). To reduce the impact of CEO overconfidence, it is necessary to strengthen the Board of Directors and make a separation of powers between the CEO and the Chairman of the Board of Directors.

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