Anchoring on the Acquisition Premium Decisions of Others

Strategic Management Journal, Volume 36, Issue 12, Pages 1866–1876, December 2015 DOI:10.1002/smj.2314

Posted: 26 May 2017

See all articles by Shavin Malhotra

Shavin Malhotra

University of Waterloo

PengCheng Zhu

University of San Diego

Taco Reus

Erasmus University Rotterdam (EUR)

Date Written: December 2015

Abstract

Anchoring is a ubiquitous heuristic by which decision makers heavily rely on a piece of information (anchor) that appears prior to a decision. Yet, we know little about its role in strategic decisions. This study considers its influence on acquisition premiums by examining whether a focal premium decision may be anchored on the premium that another firm paid for the acquisition that directly preceded the focal acquisition in the same market because it presents a salient and compatible premium to decision makers. Our results support this premise, particularly when preceding acquisitions happened more recently and were similar in size to the focal deals, when focal deals were in a foreign market, and when acquirers lacked acquisition experience in the target market or had a higher acquisition rate.

Keywords: Anchoring Theory, Mergers and Acquisitions, Acquisition Premiums, Strategic Decision Making, Heuristics

JEL Classification: G02, G34

Suggested Citation

Malhotra, Shavin and Zhu, Phil and Reus, Taco, Anchoring on the Acquisition Premium Decisions of Others (December 2015). Strategic Management Journal, Volume 36, Issue 12, Pages 1866–1876, December 2015 DOI:10.1002/smj.2314. Available at SSRN: https://ssrn.com/abstract=2973704

Shavin Malhotra (Contact Author)

University of Waterloo ( email )

200 University Ave W
Waterloo, Ontario N2L 3G1
Canada

Phil Zhu

University of San Diego ( email )

5998 Alcala Park
San Diego, CA 92110
United States

Taco Reus

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

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