Who Makes Acquisitions ? CEO Overcon dence and the Market s Reaction

@inproceedings{Malmendier2002WhoMA,
  title={Who Makes Acquisitions ? CEO Overcon dence and the Market s Reaction},
  author={Ulrike Malmendier},
  year={2002}
}
We analyze the impact of CEO overconfidence on mergers and acquisitions. Overconfident CEOs over-estimate their ability to generate returns, both in their current firm and in potential takeover targets. Thus, on the margin, they undertake mergers that destroy value. Overconfidence also implies that managers view their company as undervalued by outside investors. Therefore, the impact of overconfidence is strongest when CEOs can finance mergers internally. We test these predictions using the… CONTINUE READING
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