Endowment effect in corporate mergers and acquisitions and its impact on takeover premiums
TANG Jian1,2, ZHANG Hong1,2
1. Center for Urbanization and Industrial Development, School of Civil Engineering, Tsinghua University, Beijing 100084, China; 2. Hang Lung Center for Real Estate, Tsinghua University, Beijing 100084, China
Abstract：The endowment effect is a common behavioral bias in commodity transactions, usually manifested by the owner of an item having a higher evaluation of the item’s worth than the buyer. This study used a multivariate regression analysis to analyze 425 takeovers from 2010—2018 in which both parties were U.S. listed companies to study the endowment effect in mergers and acquisitions and its impact on the takeover premiums. The results show that there is an endowment effect that significantly increases the takeover premiums with the impact varying in different industries and being more prominent in emerging industries. The acquirers should fully consider the high takeover cost caused by the endowment effect when evaluating the target company. Policy makers should pay attention to the welfare loss caused by the endowment effect when making industry organization policies.
汤健, 张红. 公司并购中的禀赋效应及其对并购溢价的影响[J]. 清华大学学报（自然科学版）, 2021, 61(6): 565-572.
TANG Jian, ZHANG Hong. Endowment effect in corporate mergers and acquisitions and its impact on takeover premiums. Journal of Tsinghua University(Science and Technology), 2021, 61(6): 565-572.
[1] VARAIYA N P. Determinants of premiums in acquisition transactions[J]. Managerial & Decision Economics, 1987, 8(3):175-184. [2] SLUSKY A R, CAVES R E. Synergy, agency, and the determinants of premia paid in mergers[J]. The Journal of Industrial Economics, 1991, 39(3):277-296. [3] SHLEIFER A, VISHNY R W. Stock market driven acquisitions[J]. Journal of Financial Economics, 2003, 70(3):295-311. [4] ROLL R. The hubris hypothesis of corporate takeovers[J]. The Journal of Business, 1986, 59(2):197-216. [5] HAMBRICK H D C. Explaining the premiums paid for large acquisitions:Evidence of CEO hubris[J]. Administrative Science Quarterly, 1997, 42(1):103-127. [6] LANG L H P, STULZ R, WALKING R A. A test of the free cash flow hypothesis:The case of bidder returns[J]. Journal of Financial Economics, 1991,29(2):315-335. [7] BAKER M, PAN X, WURGLER J. The effect of reference point prices on mergers and acquisitions[J]. Journal of Financial Economics, 2012, 106(1):49-71. [8] 陈仕华, 李维安. 并购溢价决策中的锚定效应研究[J]. 经济研究, 2016(6):114-127.CHEN S H, LI W A. Research on anchoring effect in acquisition premium decision[J]. Economic Research Journal, 2016(6):114-127. (in Chinese) [9] KAHNEMAN D, KNETSCH J L, THALER R H. Experimental tests of the endowment effect and the coase theorem[J]. Journal of Political Economy, 1990, 98(6):1325-1348. [10] BISCHOFF I. Endowment effect theory, prediction bias and publicly provided goods:An experimental study[J]. Environmental & Resource Economics, 2008, 39(3):283-296. [11] ARLEN J, SPITZER M L, TALLEY E L. Endowment effects within corporate agency relationships[J]. The Journal of Legal Studies, 2002, 31(1):1-37. [12] THALER R H. Toward a positive theory of consumer choice[J]. Journal of Economic Behavior & Organization, 1980, 1(1):39-60. [13] KAHNEMAN D. TVERSKY A. Prospect theory:An analysis of decision under risk[J]. Econometrica, 1979, 47(2):263-292. [14] DIJK E V, KNIPPENBERG D V. Buying and selling exchange goods:Loss aversion and the endowment effect[J]. Journal of Economic Psychology, 1996, 17(4):517-524. [15] SHOGREN J E, SHIN S Y, HAYES D J, et al. Resolving differences in willingness to pay and willingness to accept?[J]. The American Economic Review. 1994, 84(1):225-270. [16] LOEWENSTEIN G, ISSACHAROFF S. Source dependence in the valuation of objects[J]. Journal of Behavioral Decision Making, 1994, 7(3):157-168. [17] MARTINEZ L F, ZEELENBERG M, RIJSMAN J B. Regret, disappointment and the endowment effect[J]. Journal of Economic Psychology, 2011, 32(6):962-968. [18] STRAHILEVITZ M, LOEWENSTEIN G. The effect of ownership history on the valuation of objects[J]. Journal of Consumer Research, 1998, 25(3):276-289. [19] LIN C H, CHUANG S C, KAO D T, et al. The role of emotions in the endowment effect[J]. Journal of Economic Psychology, 2006, 27(4):589-597. [20] LICHTENSTEIN S, SLOVIC P. The construction of preferences[M] New York:Cambridge University Press, 2006. [21] JOHNSON E J, HÄUBL G, KEINAN A. Aspects of endowment:A query theory of value construction[J]. Journal of Experimental Psychology, 2007, 33(3):461-474. [22] GILOVICH T, MEDVEC V H. The experience of regret:What, when, and why[J]. Psychological Review, 1995, 102(2):379-395. [23] WAV C, LISOWSKI W. Prospect theory and the decision to move or stay[J]. Proceedings of the National Academy of Sciences of the United States of America, 2017, 114(36):E7432. [24] 李玲, 朱宇. 公允价值不确定性对企业并购结果的影响:非同一控制下企业并购结果分析[J]. 审计与经济研究, 2008(4):70-72.LI L, ZHU Y. The impact of fair value uncertainty on the performance of M&A:Analysis of the results of M&A of companies under different control[J]. Audit Economy Research, 2008(4):70-72. (in Chinese) [25] ADAMS R, ALMEIDA H, DERREIRA D. Understanding the relationship between founder-CEOs and firm performance[J]. Journal of Empirical Finance, 2009, 16(1):136-150. [26] RUEDIGER F. Founder-CEOs, investment decisions, and stock market performance[J]. Journal of Financial and Quantitative Analysis, 2009, 44(2):439-466. [27] 陈悦, 倪浩, 陶柏. 企业并购中的讨价还价博弈模型[J]. 统计与决策, 2004(3):28-29.CHEN R, NI H, TAO B. A bargaining model in merger and acquisition[J]. Statistics & Decisions, 2004(3):28-29. (in Chinese) [28] 郭泰岳. 上市公司并购中目标企业价值评估研究:以互联网企业为例[J]. 技术经济与管理研究, 2020(1):73-78.GUO Y T. Research on value evaluation of target enterprises in M&A of listed companies:Taking internet companies as an example[J]. Technoeconomics & Management Research, 2020(1):73-78. (in Chinese) [29] 程凤朝, 刘旭, 温馨. 上市公司并购重组标的资产价值评估与交易定价关系研究[J]. 会计研究, 2013(8):40-46. CHENG F C, LIU X, WEN X. Research on the relationship between the assets valuation and transaction pricing in listed companies M&A[J]. Accounting Research, 2013(8):40-46. (in Chinese) [30] 温日光. 风险观念、并购溢价与并购完成率[J]. 金融研究, 2015(8):191-206.WEN R G.Risk concept, acquisition premium and success rate[J].Financial Research, 2015(8):191-206. (in Chinese) [31] JOCHEN R, CONNOLLY T. Possession,feelings of ownership and the endowment effect[J]. Judgment and Decision Making, 2007, 2(2):107-114.
2021, Vol. 61 
