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
Suggested Citation: Suggested Citation
Ferris, Stephen P. and Jayaraman, Narayanan and Sabherwal, Sanjiv, CEO Overconfidence and International Merger and Acquisition Activity (October 25, 2011). Journal of Financial and Quantitative Analysis (JFQA), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1982286