A Literature Review on the Decision-Making Motivation of the M&A Strategy: From Rational Expectations to Behavior Research

Zhang Shuangpeng; Zhou Jian

doi:doi:10.16538/j.cnki.fem.2018.10.009

Summary

The question about why firms pursue the M&A strategy is a critical subject in the field of M&A. Various researches support value enhancement as the rational expectation motivation, although these researches often face the result of value restructuring. Thus, the purpose of this paper is to review the empirical research on M&A motivation factors, integrate these factors from decision-making, supplement the behavior research under uncertain conditions, and develop the framework of M&A motivation factors. Based on the general decision-making frame, this paper integrates the M&A decision-making motivation on the basis of firm value targets, management value targets, rational expectation motivations of board governance mechanisms, management characteristics under bounded rationality, and behavior motivations of shaping decision frames. The result shows the trend of gradual revisions and the explanation contribution of behavior motivations made by the target direction motivation of rational expectations in the face of uncertain actual results. Based on the review and integration of M&A drive factors from decision-making, and by searching gaps from the integration, our study builds a more general formation to understand the theory development on M&A decision-making. 　　Following the decision-making process, we review and integrate the researches on M&A, the result shows two trends. First, the formation of M&A decisions receives lots of support in the use of rational expectations of target-directed, including the synergy effect, increasing the market monopoly power, lowering transaction costs, gaining resources, etc. Recent researches focus on negative earnings explanation after M&A, such as managers’ pursuit of personal interests and board of director governance effects on M&A. Second, the explanation of M&A decisions is in the micro process from external target elements and individual elements to effective decision elements. Recent researches focusing on the executives are not satisfied that who are more likely to make M&A decisions. Instead, they focus on the decision-making framework which leads them to make judgment to form M&A decisions while facing information. The result of integration shows the incremental contribution stem from behavior motivations based on boundary rational and heuristic decisions, while refocusing on decision-making origin in the existing research framework.