Managerial overconfidence and M&A performance: evidence from the UK

This paper examines the relationship between managerial overconfidence and merger
performance based on a sample of 754 mergers and acquisitions (M&A) deals in the UK from 2002 to 2018. Employing two proxies to measure overconfidence, namely, fraction of male directors on the board and frequent acquisitions, our results suggest that both a higher fraction of male directors on the board and frequent acquisitions lead to poor M&A performance both in the short run and long run, measured by cumulative abnormal returns and buy and hold abnormal returns, respectively. The results are robust across both univariate and multiple regression analyses. The policy implication of the results of this study is that board gender diversity with a balanced ratio of male directors relative to female directors could reduce managerial overconfidence and enhance M&A performance.