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File name: SSRN-id1982286. ; Size: 146K
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CEO Overconfidence and International Merger and Acquisition Activity
Stephen P. Ferris
University of Missouri at Columbia - Department of Finance
Narayanan Jayaraman
Georgia Institute of Technology - Finance Area
Sanjiv Sabherwal
University of Texas at Arlington - Department of Finance and Real Estate
October 25, 2011
Journal of Financial and Quantitative Analysis (JFQA), Forthcoming
Abstract:
This study examines the role that CEO overconfidence plays in an explanation of international mergers and acquisitions during the period 2000-2006. Using a sample of CEOs of Fortune Global 500 firms over our sample period, we find that CEO overconfidence is related to a number of critical aspects of international merger activity. Overconfidence helps to explain the number of offers made by a CEO, the frequency of diversifying acquisitions, and the use of cash to finance a merger deal. Although overconfidence is an international phenomenon, it is most extensively observed in individuals heading firms headquartered in Christian countries that encourage individualism while de-emphasizing long-term orientation in their national cultures.
Number of Pages in PDF File: 49
Keywords: overconfidence, mergers, hubris, behavioral
JEL Classification: G35, C23
Accepted Paper Series
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Date posted: January 10, 2012
Suggested CitationFerris, Stephen P., Jayaraman, Narayanan and Sabherwal, Sanjiv, CEO Overconfidence and International Merger and Acquisition Activity (October 25, 2011). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1982286
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