Are Overconfident CEOs Born or Made? Evidence of Self-Attribution Bias from Frequent Acquirers
Top Cited Papers
- 1 June 2008
- journal article
- Published by Institute for Operations Research and the Management Sciences (INFORMS) in Management Science
- Vol. 54 (6), 1037-1051
- https://doi.org/10.1287/mnsc.1070.0830
Abstract
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.overconfidence, hubris, self-attribution, frequent acquirer, mergers and acquisitions, insider tradingKeywords
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