English, Article edition: Managerial overconfidence and corporate takeovers Hongbo Pan; Xinping Xia; Minggui Yu

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Bookmark: http://trove.nla.gov.au/version/8993
Physical Description
  • article
Language
  • English

Edition details

Title
  • Managerial overconfidence and corporate takeovers
Author
  • Hongbo Pan
  • Xinping Xia
  • Minggui Yu
Physical Description
  • article
Notes
  • Purpose – The purpose of this paper is to model the announcement returns of merging firms based on managerial overconfidence about merger synergy. Design/​methodology/​approach – The paper applies continuous-time real options techniques and game theoretic concepts. Managerial overconfidence and strategic interaction between the bidder and the target are incorporated into the model. Findings – This model implies that: abnormal returns to bidding shareholders will be negative with a high degree of managerial overconfidence; combined returns to shareholders are usually positive; and both the bidder's and the target's abnormal returns are related to industry characteristics, the degree of managerial overconfidence, and the way merger synergies are divided. Originality/​value – This paper, for the first time, reconciles theoretically the following stylized facts: combined returns to shareholders are usually positive; and returns to the acquirer are, on average, not positive. In addition, the model generates new predictions relating these returns to industry characteristics and the degree of managerial overconfidence.
  • Acquisitions and mergers, Managers, Returns, Take-overs
  • RePEc:eme:ijmfpp:v:2:y:2006:i:4:p:328-342
Language
  • English
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