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

Management Science, Forthcoming

Posted: 14 Jan 2008 Last revised: 16 Dec 2015

See all articles by Matthew T. Billett

Matthew T. Billett

Indiana University - Kelley School of Business - Department of Finance

Yiming Qian

University of Connecticut

Multiple version iconThere are 2 versions of this paper

Date Written: January 1, 2008

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; (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.

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

JEL Classification: G31, G32, G34

Suggested Citation

Billett, Matthew T. and Qian, Yiming, Are Overconfident CEOS Born or Made? Evidence of Self-Attribution Bias from Frequent Acquirers (January 1, 2008). Management Science, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1081367

Matthew T. Billett

Indiana University - Kelley School of Business - Department of Finance ( email )

1309 E. 10th St.
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Yiming Qian (Contact Author)

University of Connecticut ( email )

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Storrs, CT 06269
United States
860-486-2774 (Phone)

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