The Role of CEO overconfidence in failed Mergers & Acquisitions
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2017-07-17
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en
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This study examines the influence of CEO overconfidence on M&A activity. The effect of CEO overconfidence on acquisitiveness as well as the effect of CEO overconfidence on the probability of failure of attempted mergers and acquisitions is studied. Previous studies show that overconfident CEOs are more likely to initiate mergers or acquisitions, especially when abundant internal resources are available. However, those studies have limited data and incorporate a short time frame. The availability of resources plays an important role in overconfidence as this enables CEOs to make decisions by themselves and thereby passing other corporate governance mechanisms. By using a larger data set and analyzing a larger period evidence is found for the relationship between overconfidence and acquisitiveness in case of abundant internal resources. However, no evidence is found for the expected relationship between overconfidence and the likelihood of failed M&As.
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Faculteit der Managementwetenschappen