Who makes acquisitions?
CEO overconfidence and the market's reaction
by Ulrike Malmendier
"Overconfident CEOs over-estimate their ability to generate returns. Thus, on the margin, they undertake mergers that destroy value. They also perceive outside finance to be over-priced. We classify CEOs as overconfident when, despite their under-diversification, they hold options on company stock until expiration. We find that these CEOs are more acquisitive on average, particularly via diversifying deals. The effects are largest in firms with abundant cash and untapped debt capacity. Using press coverage as "confident" or "optimistic" to measure overconfidence confirms these results. We also find that the market reacts significantly more negatively to takeover bids by overconfident managers"--National Bureau of Economic Research web site.
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Who makes acquisitions?: CEO overconfidence and the markets reaction
2004, National Bureau of Economic Research
in English
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Who makes acquisitions?: CEO overconfidence and the market's reaction
2004, National Bureau of Economic Research
Electronic resource
in English
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Book Details
Edition Notes
Includes bibliographical references.
Title from PDF file as viewed on 1/7/2005.
Also available in print.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.
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