Abstract

http://ssrn.com/abstract=687534
 
 

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


Matthew T. Billett


Indiana University - Kelley School of Business - Department of Finance

Yiming Qian


University of Iowa - Department of Finance

March 2005

AFA 2006 Boston Meetings Paper

Abstract:     
We explore the source of managerial hubris in mergers and acquisitions by examining the history of deals made by individual acquirers. Our study has three main findings: (1) Compared to their first deals, acquirers of second and higher-order deals experience significantly more 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 future deals; (3) Top management's net purchase of stock is greater preceding high order deals than it is for first deals. We interpret these results as consistent with self-attribution bias leading to managerial overconfidence. We also find evidence that the market anticipates future deals based on an acquirer's acquisition history and impounds such anticipation into stock prices.

Number of Pages in PDF File: 38

Keywords: frequent acquirer, self-attribution bias, overconfidence, hubris, mergers and acquisitions

JEL Classification: G31, G32, G34

working papers series


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Date posted: March 20, 2005  

Suggested Citation

Billett, Matthew T. and Qian, Yiming, Are Overconfident Managers Born or Made? Evidence of Self-Attribution Bias from Frequent Acquirers (March 2005). AFA 2006 Boston Meetings Paper. Available at SSRN: http://ssrn.com/abstract=687534 or http://dx.doi.org/10.2139/ssrn.687534

Contact Information

Matthew T. Billett
Indiana University - Kelley School of Business - Department of Finance ( email )
1309 E. 10th St.
Bloomington, IN 47405
United States
812-855-3366 (Phone)

Yiming Qian (Contact Author)
University of Iowa - Department of Finance ( email )
S382 Pappajohn Building
Iowa City, IA 52242
United States
319-335-0934 (Phone)
319-335-3690 (Fax)
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