Learning or Hubris? Why CEOs Create Less Value in Successive Acquisitions

Martin, John A.; Davis, Kevin J.
February 2010
Academy of Management Perspectives;Feb2010, Vol. 24 Issue 1, p79
Academic Journal
The authors discuss research by Nihat Aktas and others concerning why chief executive officers (CEO) create less value with successive acquisitions. Although observers may think that CEO hubris or overconfidence is to blame, the study by Aktas suggests that CEOs are able to correctly assess expected value. However, with successive acquisitions, they improve their ability to manage the risks that accompany the integration of acquisitions. Therefore, they may be willing to pay a higher price for acquisitions.


Related Articles

  • World is his oyster. Burr, Barry B. // Pensions & Investments;8/23/2010, Vol. 38 Issue 17, p18 

    The article presents an interview with Henry A. Fernandez, the chief executive officer of MSCI Inc. Fernandez spoke about how he led the company to make it a global powerhouse in indexing and risk management analytics. Fernandez considers himself a citizen of the world, holding citizenship in...

  • WHAT DRIVES THE PAYMENT OF HIGHER MERGER PREMIUMS?  // Gadjah Mada International Journal of Business;May-Aug2009, Vol. 11 Issue 2, p191 

    This study examines whether the premiums paid to targets firms are affected by bidder CEO overconfidence, merger waves, method of payment, industry of merged firms, and capital liquidity. Using merger data for the period spanning from 1991 to 2000, this study finds that CEOs pay less premiums in...

  • Mergers, Executive Risk Reduction, and Stockholder Wealth. Lewellen, Wilbur; Loderer, Claudio; Rosenfeld, Ahron // Journal of Financial & Quantitative Analysis;Dec89, Vol. 24 Issue 4, p459 

    Among the possible consequences of agency problems between corporate owners and managers is a tendency by managers to make investment decisions for their firms that are deliberately aimed at reducing firm risk, as a means to control managers' personal wealth risk. The literature has suggested...

  • Prince: No Fed Ban on Citi Dealmaking. Rehm, Barbara A. // American Banker;4/21/2005, Vol. 170 Issue 76, p18 

    Reports on a statement made by Citigroup Inc.'s chief executive officer Charles O. Prince on a Federal Reserve Board ban on acquisitions. Denial of a ban on acquisitions made when questioned by Evelyn Davis, an activist shareholder; Order released from the Federal Reserve Board stating that...

  • TAX & FINANCIAL PLANNING NEWS.  // Accounting Technology;Mar2003, Vol. 19 Issue 2, p14 

    Presents developments related to tax and financial planning in the U.S. as of March 2003. Resignation of chief executive officer Rebecca Hensley of CCH Legal Information Services; Selection of Steven Block as chief executive officer of Unger Software; Acquisition of ProBusiness from ADP...

  • The Narcissist Premium.  // Mergers & Acquisitions: The Dealermaker's Journal;Nov2010, Vol. 45 Issue 11, p7 

    The article presents the study entitled CEO Narcissism and the Takeover Process which examines the psychological characteristics of chief executive officers (CEO) and its impacts on mergers & acquisitions (M&A).

  • Ambition, fame and selling out.  // Business Communications Review;Dec98, Vol. 28 Issue 12, p10 

    Reports on news briefs about telecommunication as of December 1998. Prediction of increase in corporate acquisitions; Increase in visibility of high technology chief executive officers; Need for technology company launching an initial public offering to perform a thorough intellectual property...

  • Hunter Or Prey? Konish, Nancy; Gawel, Richard // Electronic Design;02/08/99, Vol. 47 Issue 3, p70 

    Reports on the results of a survey of corporate chief executive officers about the trend towards consolidation. Percentage of respondents who think about the possibility of the acquisition of their own firms; Merger as a way for company revenue growth; Preserving the business model and...

  • Do Golden Parachutes Increase CEO's DESIRE to Be Taken Over? Empirical Evidence from Australia and United States. Reddy, K. R. Krishna; Abidin, Sazali; Woon, Caillor // Asian Journal of Finance & Accounting;2012, Vol. 4 Issue 2, p107 

    This study investigates whether the large payouts that are available to Chief Executive Officers (CEOs) from a change in corporate control (takeover) do motivate some CEOs to seek acquisition of their firms by making them more attractive to a takeover bid. Using Australian and the US data,...


Read the Article


Sorry, but this item is not currently available from your library.

Try another library?
Sign out of this library

Other Topics