Are Overconfident CEOs Born or Made? Evidence of Self-Attribution Bias from Frequent Acquirers
AbstractWe explore the history of mergers and acquisitions made by individual CEOs. Our study has three main findings: (1) CEOs' first deals exhibit zero announcement effects while their subsequent deals exhibit negative announcement effects; (2) while acquisition likelihood increases in the performance associated with previous acquisitions, previous positive performance does not curb the negative wealth effects associated with subsequent deals; and (3) CEOs' net purchase of stock is greater preceding subsequent deals than it is for first deals. We interpret these results as consistent with self-attribution bias leading to overconfidence. We also find evidence that the market anticipates future deals based on the CEO's acquisition history and impounds such anticipation into stock prices.
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Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 54 (2008)
Issue (Month): 6 (June)
overconfidence; hubris; self-attribution; frequent acquirer; mergers and acquisitions; insider trading;
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