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Managerial Overconfidence in High and Low Valuation Markets and Gains to Acquisitions

Petmezas, D (2010) Managerial Overconfidence in High and Low Valuation Markets and Gains to Acquisitions International Review of Financial Analysis, 19 (5). 368 - 378. ISSN 1057-5219

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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.

Item Type: Article
Additional Information: Copyright 2010 Elsevier. All rights reserved. This is the author's version. A definitive version was subseqently published in International Review of Financial Analysis, 19(5)2010, DOI:10.1016/j.irfa.2010.06.003
Divisions: Faculty of Business, Economics and Law > Surrey Business School
Depositing User: Symplectic Elements
Date Deposited: 01 Mar 2012 13:29
Last Modified: 23 Sep 2013 19:05
URI: http://epubs.surrey.ac.uk/id/eprint/178677

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