A new method for measuring CEO overconfidence: Evidence from acquisitions

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dc.contributor.authorIsmail, Ahmad K.
dc.contributor.authorMavis, Christos P.
dc.contributor.departmentOSB
dc.contributor.facultySuliman S. Olayan School of Business (OSB)
dc.contributor.institutionAmerican University of Beirut
dc.date.accessioned2025-01-24T12:16:02Z
dc.date.available2025-01-24T12:16:02Z
dc.date.issued2022
dc.description.abstractThis 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. © 2021
dc.identifier.doihttps://doi.org/10.1016/j.irfa.2021.101964
dc.identifier.eid2-s2.0-85120934222
dc.identifier.urihttp://hdl.handle.net/10938/33504
dc.language.isoen
dc.publisherElsevier Inc.
dc.relation.ispartofInternational Review of Financial Analysis
dc.sourceScopus
dc.subjectAbnormal returns
dc.subjectCeo overconfidence
dc.subjectHubris
dc.subjectMergers and acquisitions
dc.subjectSynergies forecast error
dc.subjectTakeover premium
dc.titleA new method for measuring CEO overconfidence: Evidence from acquisitions
dc.typeArticle

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