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. © 2010 Elsevier Inc.
Croci, E., Petmezas, D., Vagenas Nanos, E. (2010). Managerial overconfidence in High and Low valuation markets: Evidence from the UK. INTERNATIONAL REVIEW OF FINANCIAL ANALYSIS, 19(5), 368-378 [10.1016/j.irfa.2010.06.003].
Managerial overconfidence in High and Low valuation markets: Evidence from the UK
CROCI, ETTORE;
2010
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. © 2010 Elsevier Inc.
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