CEO Overconfidence and International Merger and Acquisition Activity
49 Pages Posted: 10 Jan 2012
Date Written: October 25, 2011
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.
Keywords: overconfidence, mergers, hubris, behavioral
JEL Classification: G35, C23
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