Management Optimism and Corporate Acquisitions: Evidence from Insider Trading

Posted: 20 Dec 1998

See all articles by Jeffry M. Netter

Jeffry M. Netter

Department of Finance; University of Georgia Law School

Ekkehart Boehmer

Singapore Management University - Lee Kong Chian School of Business

Date Written: March 1994

Abstract

We examine the relation between managers' personal beliefs about their firm's prospects, decisions by managers to make acquisitions, and decisions by managers to resist takeover offers for their firms. Using insider-trading data, we analyze whether managers are willing to stake their own money in addition to the firm's on the firm's acquisition strategy. Acquiring firm managers generally increase purchases of their own firm's stock, but this optimism is concentrated in firms that are eventually targets of hostile bids themselves. This optimism is inconsistent with explanations of takeover resistance that rest on managerial entrenchment or non-value-maximizing behavior.

JEL Classification: G34

Suggested Citation

Netter, Jeffry M. and Boehmer, Ekkehart, Management Optimism and Corporate Acquisitions: Evidence from Insider Trading (March 1994 ). Available at SSRN: https://ssrn.com/abstract=5660

Jeffry M. Netter

Department of Finance ( email )

Terry College of Business
Athens, GA 30602-6253
United States
706-542-4450 (Phone)

HOME PAGE: http://www.terry.uga.edu/directory/profile/jnetter/

University of Georgia Law School

225 Herty Drive
Athens, GA 30602
United States

Ekkehart Boehmer (Contact Author)

Singapore Management University - Lee Kong Chian School of Business ( email )

Singapore

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