CEO Overconfidence and International Merger and Acquisition Activity

Stephen P. Ferris, Narayanan Jayaraman and Sanjiv Sabherwal

Journal of Financial and Quantitative Analysis, 2013, vol. 48, issue 1, 137-164

Abstract: This study examines the role that chief executive officer (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 frequencies of nondiversifying and 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.

Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:cup:jfinqa:v:48:y:2013:i:01:p:137-164_00

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