Managerial overconfidence in high and low valuation markets and gains to acquisitions
AbstractIn this paper we empirically investigate bidders' performance managed by overconfident and non-overconfident managers in high and low market valuation periods. Using a sample of UK acquisitions in the period 1990-2005, we provide evidence that the interaction between market valuation and different behavioral traits of managers is a determinant of bidders' returns. In contrast to overconfident managers, non-overconfident managers conduct value-creative acquisition deals in all valuation periods. In addition, when we control for acquirer and deal characteristics, we find that bidders with non-overconfident managers gain the most in high valuation periods, while firms are better off without overconfident managers in any type of market conditions.
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Bibliographic InfoArticle provided by Elsevier in its journal International Review of Financial Analysis.
Volume (Year): 19 (2010)
Issue (Month): 5 (December)
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Web page: http://www.elsevier.com/locate/inca/620166
Market valuation Managerial overconfidence Stock options Abnormal returns;
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