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Selected deal characteristics of mergers and acquisitions and chief executive officer overconfidence : a South African study
Thesis (MA)--Stellenbosch University, 2024.
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Stellenbosch : Stellenbosch University
2025
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| _version_ | 1867614112406568960 |
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| access_status_str | Open Access |
| author | Louw, Kaelin |
| author2 | De Vries, Annalien |
| author_browse | De Vries, Annalien Louw, Kaelin |
| author_facet | De Vries, Annalien Louw, Kaelin |
| author_sort | Louw, Kaelin |
| collection | Thesis |
| dc_rights_str_mv | Stellenbosch University |
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Thesis (MA)--Stellenbosch University, 2024. |
| format | Thesis |
| id | oai:scholar.sun.ac.za:10019.1/131809 |
| institution | Stellenbosch University (South Africa) |
| last_indexed | 2026-06-10T12:46:51.765Z |
| license_str | Other — see source repository |
| provenance_str_mv | Harvested via OAI-PMH from SUNScholar — Stellenbosch University Repository |
| publishDate | 2025 |
| publishDateRange | 2025 |
| publishDateSort | 2025 |
| publisher | Stellenbosch : Stellenbosch University |
| publisherStr | Stellenbosch : Stellenbosch University |
| record_format | dspace |
| source_str | SUNScholar — Stellenbosch University Repository |
| spelling | oai:scholar.sun.ac.za:10019.1/131809 Selected deal characteristics of mergers and acquisitions and chief executive officer overconfidence : a South African study Louw, Kaelin De Vries, Annalien Viviers, Suzette Stellenbosch University. Faculty of Economic and Management Sciences. Dept. of Business Management. Consolidation and merger of corporations -- South Africa Success in business -- South Africa Corporate reorganizations -- South Africa Organizational change -- Decision making -- South Africa UCTD Thesis (MA)--Stellenbosch University, 2024. ENGLISH SUMMARY: International research reports that the failure rate of mergers and acquisitions (M&A) is between 60 and 90 percent, with experts claiming that this statistic will not improve soon. Failure can be defined as short- and long-term underperformance. Several deal characteristics have been associated with such underperformance including deal rationale, premium paid, deal size, financing structure and the number of deals previously completed by the acquirer. Behavioural finance scholars have linked cognitive/behavioural biases to these aspects of business combinations. Theory proposes a strong association between chief executive officer (CEO) overconfidence and certain deal characteristics, which in turn contributes to the large M&A failure rate. Numerous studies have considered the relationship between M&A deal characteristics and CEO overconfidence. Most of these studies were conducted in developed markets indicating that there is limited literature on this relationship in an emerging market context. The economic and political environments differ greatly between emerging and developed markets, and the different types of cultures might impact executives’ decision making in M&A-related decisions. It is imperative that the relationship between deal characteristics and CEO overconfidence is understood holistically. South Africa was selected as the setting for this study and contributes to the existing body of knowledge on business acquisitions and behavioural finance. A comprehensive dataset was compiled comprising of five deal characteristics and CEOs’ levels of overconfidence for the selected acquiring companies listed on the Johannesburg Stock Exchange (JSE) over the period 2016 to 2023. The CEO overconfidence data were calculated using the conventional Longholder measure along with a novel overconfidence proxy, namely, the Receptiviti score. The control variables included CEO age, gender, tenure, educational background, nationality and the board independence of the acquirer. Deal characteristic data and the data for six control variables were retrieved from the Bloomberg (2024) database. The final sample consisted of 119 deals conducted by 78 CEOs over the research period. Two sets of hypotheses were formulated. The first set of hypotheses centred on the associations between CEO overconfidence and the control variables. The second set of hypotheses investigated the relationships between the deal characteristics and CEO overconfidence. A descriptive analysis was employed to summarise the dataset including measures of central tendency, dispersion and shape. Thereafter, the associations between the control variables and CEO overconfidence (the first of two sets of hypotheses) were analysed using cross-tabulations with Chi-Square tests and correlation analyses. Cross-sectional and logistic regressions were then utilised to investigate the hypothesised relationships between the deal characteristics and CEO overconfidence (the second set of hypotheses). Inferential tests uncovered a statistically significant negative correlation between CEO age and overconfidence, proxied by the Receptiviti score. This finding meant that younger CEOs in the sample were more overconfident than their older counterparts. Additionally, it was uncovered that CEOs with financial backgrounds had higher levels of overconfidence than their counterparts who had other educational backgrounds. The researcher further discovered that a higher board independence was related to lower levels of CEO overconfidence. More independent non-executive directors (INEDs) on the acquiring companies’ boards seemingly kept executives’ overconfidence in check over the research period. The empirical results further showed that overconfident CEOs pursued more deals during their tenure, which makes the risk of failure greater. The study finally demonstrated that overconfident CEOs preferred to undertake deals within the same industry, in other words, non-diversifying deals. The agency, stewardship and upper echelon theories were applied to interpret the findings of this study. This study made academic contributions to the field of behavioural corporate finance and M&As within the South African context. It is the first study to investigate the relationship between South African M&A deal characteristics and CEO overconfidence. In addition, a pioneering academic contribution was made by highlighting the novel Receptiviti overconfidence proxy. Practical contributions were made to several stakeholders. Nomination committees and shareholders are encouraged to conduct more thorough investigations of prospective CEOs prior to their nomination and voting for their election. Shareholders and governance committees are also urged to appoint more INEDs to monitor and counteract the risks posed by excessively overconfident CEOs. While M&A success or failure was not directly measured in this study, emphasis was placed on deal characteristics that may be linked to underperformance and subsequent failure. AFRIKAANSE OPSOMMING: Internasionale navorsing toon dat die mislukkingskoers van samesmeltings en verkrygings (S&V) tussen 60 en 90 persent is, met kenners wat beweer dat hierdie statistiek nie binnekort sal verbeter nie. Mislukking kan gedefinieer word as kort- en langtermyn onderprestasie. Verskeie transaksie-eienskappe word geassosieer met sulke onderprestasie, insluitend die rede vir die transaksie, die premie wat betaal is, transaksiegrootte, finansieringsstruktuur en die aantal transakasies wat voorheen deur die verkryger voltooi is. Deskundiges op die gebied van gedragsfinansies koppel verskeie kognitiewe/gedragsvooroordele aan hierdie aspekte van sakekombinasies. Die teorie stel ’n sterk assosiasie tussen die oormatige selfvertroue van hoof-uitvoerende beamptes (HUB’s) en sekere transaksie-eienskappe, wat bydra tot die hoe S&V mislukkingskoers. Talle studies het die verband tussen S&V transaksie-eienskappe en oormatige selfvertroue van HUB’s bestudeer. Die meeste van hierdie studies is in ontwikkelde markte gedoen, wat aandui dat daar beperkte literatuur oor hierdie verhouding in ‘n ontluikende markkonteks is. Die ekonomiese en politieke omgewings tussen ontluikende en ontwikkelde markte verskil grootliks, en die verskillende tipes kulture kan uitvoerende bestuurders se besluitneming in S&V-verwante besluite beinvloed. Dit is noodsaaklik dat die verhouding tussen transaksie-eienskappe en HUB’s se oormatige selfvertroue holisties verstaan word. Suid-Afrika is gekies as die konteks waarin hierdie studie uitgevoer is en dra by tot die bestaande kennispoel oor saketransaksies en gedragsfinansiering. ‘n Omvattende datastel is saamgestel wat bestaan uit vyf transaksie-eienskappe en HUB’s se vlakke van oormatige selfvertroue vir die geselekteerde verkrygende maatskappye wat oor die tydperk 2016 tot 2023 op die Johannesburgse Aandelebeurs genoteer is. Die data vir HUB’s se vlakke van oormatige selfvertroue is bereken met behulp van die tradisionele Longholder maatstaf tesame met ‘n nuwe maatstaf, naamlik die Receptiviti telling. Die beheerveranderlikes het HUB-ouderdom, geslag, dienstermyn, opvoedkundige agtergond, nasionaliteit en die onafhanklikheid van die verkryger se direksie ingesluit. Data vir die transaksie-eienskappe asook die ses beheerveranderlikes is verkry vanaf die Bloomberg (2024) databasis. Die finale steekproef het bestaan uit 119 transaksies wat uitgevoer is deur 78 HUB’s oor die navorsingsperiode. Twee stelle hipoteses is geformuleer. ‘n Beskrywende analise is gebruik om die datastel op te som. Daarna is verwantskappe tussen die beheerveranderlikes en HUB oormatige selfvertroue (die eerste stel hipoteses) geanaliseer met behulp van kruis-tabulering met Chi-Square toetse, asook korrelasie analises. Kruissnit en logistiese regressies is daarna gebruik om die verwagte verhoudings tussen die transaksie-eienskappe en die HUB oormatige selfvertroue (die tweede stel hipoteses) te ondersoek. Inferensiele toetse het ‘n statistiese beduidende negatiewe korrelasie tussen HUB ouderdom en oormatige selfvertroue gevind, deur die Receptiviti tellings te gebruik. Hierdie bevinding beteken dat jonger HUB’s meer oormatige selfvertroue getoon het as hul ouer ewekniee. Verder het die resultate getoon dat HUBs met ‘n finansiele agtergrond hoer vlakke van oormatige selvertroue het in vergelyking met hul ewekniee met ander opvoedkundige agtergronde. Die navorser het verder ontdek dat hoer vlakke van raadsonafhanklikheid verband hou met laer vlakke van HUB oormatige selfvertroue. Die implikasie is dat meer onafhanklike nie-uitvoerende direkteure op die rade van maatskappye in hierdie steekproef moontlik HUB’s se oormatige selfvertroue in toom kon hou. Die resultate het verder aangedui dat HUB’s met meer oormatige selfvertroue meer transaksies gedurende hulle dienstermyn onderneem het, wat die risiko vir mislukking verhoog. Die studie het ook getoon dat HUB’s met meer oormatige selfvertroue verkies het om transaksies binne dieselfde bedryf aan te pak. Die agentskap-, rentmeesterskap- en boonste besluitnemingsvlak teoriee is gebruik om die bevindinge van hierdie studie te intepreteer. Hierdie studie het akademiese bydraes gelewer tot die veld van gedragskorporatiewe finansies asook die M&A veld binne die Suid-Afrikaanse konteks. Dit is die eerste studie wat die verhouding tussen HUB oormatige selfvertroue en Suid-Afrikaanse M&A transaksie-eienskappe ondersoek. Daarbenewens is ‘n baanbrekende akademiese bydrae gemaak deur die nuwe Receptiviti telling te beklemtoon as ’n oormatige selfvertroue maatstaf. Praktiese bydraes is gemaak aan verskeie belanghebbendes. Nominasiekomitees en aandeelhouers word aangemoedig om meer omvattende ondersoeke van voornemende HUB’s te doen voordat hulle genomineer en verkies word. Aandeelhouers en bestuurskomitees word aangespoor om meer onafhanklike nie-uitvoerende direkteure aan te stel om die risiko’s wat met HUB’s met buitensporige selfvertroue saamkom, te monitor en tee te werk. Terwyl M&A sukses of mislukking nie direk gemeet is in die studie nie, is klem gele op die transaksie-eienskappe wat gekoppel mag wees met onderprestasie en gevolglike mislukking. Masters 2025-03-28T12:38:34Z 2025-03-28T12:38:34Z 2024-12 Thesis https://scholar.sun.ac.za/handle/10019.1/131809 Stellenbosch University xiv, 161 pages : illustrations, includes annexures application/pdf Stellenbosch : Stellenbosch University |
| spellingShingle | Consolidation and merger of corporations -- South Africa Success in business -- South Africa Corporate reorganizations -- South Africa Organizational change -- Decision making -- South Africa UCTD Louw, Kaelin Selected deal characteristics of mergers and acquisitions and chief executive officer overconfidence : a South African study |
| title | Selected deal characteristics of mergers and acquisitions and chief executive officer overconfidence : a South African study |
| title_full | Selected deal characteristics of mergers and acquisitions and chief executive officer overconfidence : a South African study |
| title_fullStr | Selected deal characteristics of mergers and acquisitions and chief executive officer overconfidence : a South African study |
| title_full_unstemmed | Selected deal characteristics of mergers and acquisitions and chief executive officer overconfidence : a South African study |
| title_short | Selected deal characteristics of mergers and acquisitions and chief executive officer overconfidence : a South African study |
| title_sort | selected deal characteristics of mergers and acquisitions and chief executive officer overconfidence a south african study |
| topic | Consolidation and merger of corporations -- South Africa Success in business -- South Africa Corporate reorganizations -- South Africa Organizational change -- Decision making -- South Africa UCTD |
| url | https://scholar.sun.ac.za/handle/10019.1/131809 |
| work_keys_str_mv | AT louwkaelin selecteddealcharacteristicsofmergersandacquisitionsandchiefexecutiveofficeroverconfidenceasouthafricanstudy |