Serial Acquirer Bidding: An Empirical Test of the Learning Hypothesis

37 Pages Posted: 7 Oct 2009 Last revised: 23 Oct 2010

See all articles by Nihat Aktas

Nihat Aktas

WHU - Otto Beisheim School of Management

Eric de Bodt

NHH-Caltech

Richard Roll

California Institute of Technology

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Date Written: July 7, 10

Abstract

Recent academic studies indicate that acquirers’ cumulative abnormal returns (CAR) decline from deal to deal in acquisitions programs. Does this pattern suggest hubristic CEO behaviors are significant enough to influence average CAR patterns during acquisitions programs? An alternative explanation is CEO learning. This study therefore tests for learning using successive acquisitions of large U.S. public targets undertaken by U.S. acquirers. A dynamic framework reveals that both rational and hubristic CEOs take on average investor reactions to their previous deals into account and adjust their bidding behavior accordingly. These results are consistent with a learning hypothesis.

Keywords: Acquisitions program, Learning, Hubris, Bid premium

JEL Classification: G34

Suggested Citation

Aktas, Nihat and de Bodt, Eric and Roll, Richard W., Serial Acquirer Bidding: An Empirical Test of the Learning Hypothesis (July 7, 10). Paris December 2009 Finance International Meeting AFFI - EUROFIDAI, Journal of Corporate Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1483595 or http://dx.doi.org/10.2139/ssrn.1483595

Nihat Aktas (Contact Author)

WHU - Otto Beisheim School of Management ( email )

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Eric De Bodt

NHH-Caltech ( email )

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Richard W. Roll

California Institute of Technology ( email )

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