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Are Overconfident CEOs Born or Made? Evidence of Self-Attribution Bias from Frequent Acquirers

  • Matthew T. Billett

    ()

    (Henry B. Tippie College of Business, University of Iowa, Iowa City, Iowa 52242)

  • Yiming Qian

    ()

    (Henry B. Tippie College of Business, University of Iowa, Iowa City, Iowa 52242)

We 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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File URL: http://dx.doi.org/10.1287/mnsc.1070.0830
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Article provided by INFORMS in its journal Management Science.

Volume (Year): 54 (2008)
Issue (Month): 6 (June)
Pages: 1037-1051

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Handle: RePEc:inm:ormnsc:v:54:y:2008:i:6:p:1037-1051
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