 A new method for measuring CEO overconfidence: Evidence from acquisitionsAhmad Ismail and Christos P. Mavis International Review of Financial Analysis, 2022, vol. 79, issue C Abstract: This study proposes a new direct method of measuring managerial overconfidence using an acquisition setting. CEOs with significantly higher synergies forecast error (SFE), measured as the deviation between acquisition forecasted operating synergies and actual realized operating synergies, are more likely to exhibit traits of overconfidence. In support of this view, we find that synergies forecast error is positively related to takeover premium and negatively related to acquirer returns. Additionally, validation tests confirm that high SFE firms conduct more diversifying acquisitions. Reflecting, as well, the ex-ante power of the overconfidence measure in other settings, high SFE firms have a positive relation with capital expenditures, leverage, and innovation, and negative relation with equity issues. Keywords: CEO overconfidence; Synergies forecast error; Hubris; Mergers and acquisitions; Takeover premium; Abnormal returns (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:79:y:2022:i:c:s1057521921002453 DOI: 10.1016/j.irfa.2021.101964 Access Statistics for this article International Review of Financial Analysis is currently edited by B.M. Lucey More articles in International Review of Financial Analysis from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.