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

Ettore Croci, Dimitris Petmezas and Evangelos Vagenas-Nanos

International Review of Financial Analysis, 2010, vol. 19, issue 5, 368-378

Abstract: 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.

Keywords: Market; valuation; Managerial; overconfidence; Stock; options; Abnormal; returns (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:19:y:2010:i:5:p:368-378

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