Who makes acquisitions?
Subtitle: CEO overconfidence and the market's reaction
By: Ulrike Malmendier, Geoffrey Tate.
Contributors: Tate, Geoffrey.; National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 10813; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 10813.
Publisher: National Bureau of Economic Research
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Consolidation and merger of corporations.; Chief executive officers.
Description: "Overconfident CEOs over-estimate their ability to generate returns.  Thus, on the margin, they undertake mergers that destroy value.  They also perceive outside finance to be over-priced.  We classify CEOs as overconfident when, despite their under-diversification, they hold options on company stock until expiration.  We find that these CEOs are more acquisitive on average, particularly via diversifying deals.  The effects are largest in firms with abundant cash and untapped debt capacity.  Using press coverage as "confident" or "optimistic" to measure overconfidence confirms these results.  We also find that the market reacts significantly more negatively to takeover bids by overconfident managers"--National Bureau of Economic Research web site.
Notes: Includes bibliographical references.
Title from PDF file as viewed on 1/7/2005.
Also available in print.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.