The blind power: Power-led CEO overconfidence and M&A decision making

Hwang, Hyoseok (David); Kim, Hyun-Dong; Kim, Taeyeon

doi:10.1016/j.najef.2019.101141

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The blind power: Power-led CEO overconfidence and M&A decision making

Hwang, Hyoseok (David);
Kim, Hyun-Dong;
Kim, Taeyeon

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41

초록

The behavioral finance literature attributes failed M&As to CEO overconfidence. We investigate the source of CEO overconfidence that leads to failed M&As. Among various determinants of CEO overconfidence, we propose that power-led CEO overconfidence delivers undesirable consequences in corporate investments. Using CEO-level data, we find that CEO power increases the probability of a CEO being overconfident. We also show that power-led overconfident CEOs tend to complete more deals regardless of economic circumstances, do stock acquisitions, and make diversifying acquisitions, relative to non-overconfident CEOs. The results suggest that the findings of previous studies on M&As by overconfident CEOs could be driven by power-led overconfident CEOs.

키워드

CEO overconfidence; CEO power; Mergers and acquisitions; Corporate governance; SELF-SERVING BIASES; CORPORATE DIVERSIFICATION; AGENCY COSTS; FIRM; COMPENSATION; ACQUISITIONS; ATTRIBUTION; GOVERNANCE; PERFORMANCE; CONTRACTS

제목: The blind power: Power-led CEO overconfidence and M&A decision making

저자: Hwang, Hyoseok (David); Kim, Hyun-Dong; Kim, Taeyeon

DOI: 10.1016/j.najef.2019.101141

발행일: 2020-04

유형: Article

저널명: North American Journal of Economics and Finance

권: 52