Serial Acquirer Bidding: An Empirical Test of the Learning Hypothesis
37 Pages Posted: 7 Oct 2009 Last revised: 23 Oct 2010
Date Written: July 7, 10
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: Suggested Citation