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Analysis of Managerial Overconfidence on Growth of Firms after Undertaking the Merger and Acquisition Strategy: Case of Banks Listed in Nairobi Securities Exchange, Kenya

Social and Basic Sciences Research Review

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Title Analysis of Managerial Overconfidence on Growth of Firms after Undertaking the Merger and Acquisition Strategy: Case of Banks Listed in Nairobi Securities Exchange, Kenya
 
Creator Warui, Stephen Kamau
Gongera, George E.
Bichanga, Julius
 
Subject Merger and Acquisition Strategy, Nairobi Securities Exchange (N. S. E), Firm Undervaluation, Financial Performance,
 
Description It has been widely considered that one of the factors that affect the growth rate of listed commercial banks in Kenya that chose to undertake the M&A growth strategy is the over-confidence of managers. However, the study of whether managerial overconfidence affects the growth-rate of firms that undertake the M&A growth strategy has not been carried out before by researchers in Kenya. This therefore compelled the researcher to carry out a comprehensive study on seven listed commercial banks in Kenya that have undertaken the M&A strategy, mainly focusing on finding-out whether managerial overconfidence is a key-factor to hinder the growth of listed commercial banks in Kenya. The main objective of the study is to find out if overconfidence in the use of the merger and acquisition strategy by management in listed commercial banks affects their firms’ sales growth and firm profits. The null hypotheses of the study was that there was no significant relationship between managerial self-interest and declining synergy gains and profits for listed commercial banks in Kenya. A survey research design was employed in the study, mainly meant to look into the financial performances of listed commercial banks in Kenya having undertaken the M&A strategy and them being undervalued. The sample size comprised of all the seven listed commercial banks that had previously undertaken the merger and acquisition strategy, specifically between the period of January 2001 and June 2015. On the analysis of the relationship between managerial overconfidence in the use of the M&A strategy and declining growth patterns in terms of sales and profits, it was found that, of the seven banks studied, six (85.7%) revealed that there was no significant relationship between having managers who are overconfident in using the M&A strategy and why the firms were recording lower growth rates in terms of sales and profits; and only two banks (14.3%) were of the opinion that there is a significant relationship between having managers who are overconfident in using the M&A strategy and why the firms were recording lower growth rates in terms of sales and profits. It can therefore be concluded that, in majority of the banks, there was no significant relationship between managerial overconfidence in using the M&A strategy and declining growth patterns in terms of sales and profits.
 
Publisher Academy of Business & Scientific Research (ABSR)
 
Date 2016-07-01
 
Type info:eu-repo/semantics/article
info:eu-repo/semantics/publishedVersion
Peer-reviewed Article
 
Format application/pdf
 
Identifier http://absronline.org/journals/index.php/sbsrr/article/view/632
 
Source Social and Basic Sciences Research Review; Vol 4 No 7 (2016): July; 142-150
2313-6758
 
Language eng
 
Relation http://absronline.org/journals/index.php/sbsrr/article/view/632/651
 
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