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Serial acquirer bidding: An empirical test of the learning hypothesis

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  • Aktas, Nihat
  • de Bodt, Eric
  • Roll, Richard
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    Abstract

    Recent academic studies indicate that acquirers' cumulative abnormal returns (CAR) decline from deal to deal in acquisition programs. Does this pattern suggest hubristic CEO behaviors are significant enough to influence average CAR patterns during acquisition programs? An alternative explanation is CEO learning. This study therefore tests for learning using successive acquisitions of large U.S. public targets undertaken by U.S. acquirers. A dynamic framework reveals that both rational and hubristic CEOs take on average investor reactions to their previous deals into account and adjust their bidding behavior accordingly. These results are consistent with a learning hypothesis.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Corporate Finance.

    Volume (Year): 17 (2011)
    Issue (Month): 1 (February)
    Pages: 18-32

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    Handle: RePEc:eee:corfin:v:17:y:2011:i:1:p:18-32

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    Web page: http://www.elsevier.com/locate/jcorpfin

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    Keywords: Acquisition program Learning Hubris Bid premium;

    References

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    Cited by:
    1. Bargeron, Leonce L. & Lehn, Kenneth & Moeller, Sara B. & Schlingemann, Frederik P., 2014. "Disagreement and the informativeness of stock returns: The case of acquisition announcements," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 155-172.
    2. Jaffe, Jeffrey & Pedersen, David & Voetmann, Torben, 2013. "Skill differences in corporate acquisitions," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 166-181.
    3. Calcagno, Riccardo & Falconieri, Sonia, 2014. "Competition and dynamics of takeover contests," Journal of Corporate Finance, Elsevier, vol. 26(C), pages 36-56.

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