This Article Full Text (PDF) References Alert me when this article is cited Alert me if a correction is posted Services Email this article to a friend Similar articles in this journal Alert me to new issues of the journal Download to citation manager Citing Articles Citing Articles via Google Scholar Google Scholar Articles by Billett, M. T. Articles by Qian, Y. Search for Related Content

Are Overconfident CEOs Born or Made? Evidence of Self-Attribution Bias from Frequent Acquirers

Henry B. Tippie College of Business, University of Iowa, Iowa City, Iowa 52242
Henry B. Tippie College of Business, University of Iowa, Iowa City, Iowa 52242
matt-billett{at}uiowa.edu
yiming-qian{at}uiowa.edu

We explore the history of mergers and acquisitions made by individual CEOs. Our study has three main findings: (1) CEOs' first deals exhibit zero announcement effects while their subsequent deals exhibit negative announcement effects; (2) while acquisition likelihood increases in the performance associated with previous acquisitions, previous positive performance does not curb the negative wealth effects associated with subsequent deals; and (3) CEOs' net purchase of stock is greater preceding subsequent deals than it is for first deals. We interpret these results as consistent with self-attribution bias leading to overconfidence. We also find evidence that the market anticipates future deals based on the CEO's acquisition history and impounds such anticipation into stock prices.

Key Words: overconfidence; hubris; self-attribution; frequent acquirer; mergers and acquisitions; insider trading
History: Received: July 18, 2006;