Hubris, Learning, and M&A Decisions
AbstractAre CEOs unable to learn? This surprising question deserves to be raised in the light of the declining pattern of cumulative abnormal returns observed in M&A programs. This paper shows that this pattern is the expected ex post empirical evidence for rational risk averse CEOs. Our theoretical argument is that from deal to deal, rational CEOs become more aggressive in the bidding process. They concede increasing fractions of expected synergies to the target shareholders in order to win the bidding game. For CEOs infected by hubris, the learning process should allow them to progressively correct over-optimism and overconfidence, if they survive.
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Bibliographic InfoPaper provided by Anderson Graduate School of Management, UCLA in its series University of California at Los Angeles, Anderson Graduate School of Management with number qt7j94111c.
Date of creation: 11 May 2005
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