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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

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.

Suggested Citation

  • Aktas, Nihat & de Bodt, Eric & Roll, Richard, 2011. "Serial acquirer bidding: An empirical test of the learning hypothesis," Journal of Corporate Finance, Elsevier, vol. 17(1), pages 18-32, February.
  • Handle: RePEc:eee:corfin:v:17:y:2011:i:1:p:18-32
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    References listed on IDEAS

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    Cited by:

    1. Amor, Salma Ben & Kooli, Maher, 2016. "Do acquisitions affect IPO long-run performance? Evidence from single vs. multiple acquirers," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 40(C), pages 63-79.
    2. Schneck, Colin & Bessler, Wolfgang & Zimmermann, Jan, 2014. "Bidder Contests in International Mergers and Acquisitions: The Impact of Toeholds, Preemptive Bidding, and Termination Fees," Annual Conference 2014 (Hamburg): Evidence-based Economic Policy 100493, Verein für Socialpolitik / German Economic Association.
    3. Calcagno, Riccardo & Falconieri, Sonia, 2014. "Competition and dynamics of takeover contests," Journal of Corporate Finance, Elsevier, vol. 26(C), pages 36-56.
    4. De Cesari, Amedeo & Gonenc, Halit & Ozkan, Neslihan, 2016. "The effects of corporate acquisitions on CEO compensation and CEO turnover of family firms," Journal of Corporate Finance, Elsevier, vol. 38(C), pages 294-317.
    5. Aktas, Nihat & Cousin, Jean-Gabriel & Ozdakak, Ali & Zhang, Junyao, 2016. "Industry IPOs, growth opportunities, and private target acquisitions," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 193-209.
    6. Jaffe, Jeffrey & Pedersen, David & Voetmann, Torben, 2013. "Skill differences in corporate acquisitions," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 166-181.
    7. Chikh, Sabrina & Filbien, Jean-Yves, 2011. "Acquisitions and CEO power: Evidence from French networks," Journal of Corporate Finance, Elsevier, vol. 17(5), pages 1221-1236.
    8. M. V. Shyam Kumar & Jaya Dixit & Bill Francis, 2015. "The impact of prior stock market reactions on risk taking in acquisitions," Strategic Management Journal, Wiley Blackwell, vol. 36(13), pages 2111-2121, December.
    9. Laimutė Urbšienė & Viktorija Nemunaitytė & Artūras Zatulinas, 2015. "Comparison Of Premiums Of Chinese And European Companies In Mergers And Acquisitions In Europe," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 6(2).
    10. 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.
    11. John S. Marsh & William J. Wales & Fariss-Terry Mousa & Rachel Graefe-Anderson, 2016. "Countermove: how CEOs respond to post-acquisition compensation adjustments," Review of Managerial Science, Springer, vol. 10(4), pages 711-755, October.
    12. Bessler, Wolfgang & Schneck, Colin & Zimmermann, Jan, 2015. "Bidder contests in international mergers and acquisitions: The impact of toeholds, preemptive bidding, and termination fees," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 4-23.
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