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Acquisition Experience and the Winner’s Curse in Corporate Acquisitions

Author

Listed:
  • Marta Arroyabe

    (University of Essex, UK)

  • Katrin Hussinger

    (DEM, Université du Luxembourg)

Abstract

The winner’s curse describes the behavioral phenomenon that the winner of a bidding contest pays a price which is too high. This paper shows that experiential learning cannot prevent a winner’s curse on the market of corporate control as acquiring firms with acquisition experience still pay a higher price for the target in a bidding contest. Acquisition experience, however, is related to a superior post-acquisition performance of the winning firm after acquisitions associated with a bidding contest.

Suggested Citation

  • Marta Arroyabe & Katrin Hussinger, 2023. "Acquisition Experience and the Winner’s Curse in Corporate Acquisitions," DEM Discussion Paper Series 23-07, Department of Economics at the University of Luxembourg.
    • Handle: RePEc:luc:wpaper:23-07
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    File URL: https://hdl.handle.net/10993/55479
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    References listed on IDEAS

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    More about this item

    Keywords

    Firm acquisitions; winner’s curse; bidding contest; acquisition experience; experiential learning.;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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