Managerial overconfidence in high and low valuation markets and gains to acquisitions

Croci, E., Petmezas, D. and Vagenas-Nanos, E. (2010) Managerial overconfidence in high and low valuation markets and gains to acquisitions. International Review of Financial Analysis, 19(5), pp. 368-378. (doi: 10.1016/j.irfa.2010.06.003)

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In this paper we empirically investigate bidders' performance managed by overconfident and non-overconfident managers in high and low market valuation periods. Using a sample of UK acquisitions in the period 1990–2005, we provide evidence that the interaction between market valuation and different behavioral traits of managers is a determinant of bidders' returns. In contrast to overconfident managers, non-overconfident managers conduct value-creative acquisition deals in all valuation periods. In addition, when we control for acquirer and deal characteristics, we find that bidders with non-overconfident managers gain the most in high valuation periods, while firms are better off without overconfident managers in any type of market conditions.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Vagenas-Nanos, Professor Evangelos
Authors: Croci, E., Petmezas, D., and Vagenas-Nanos, E.
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:International Review of Financial Analysis
Publisher:Elsevier BV * North-Holland
ISSN (Online):1873-8079
Published Online:06 July 2010

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