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Does CEO overconfidence matter for shareholders’ wealth? Evidence from the UK takeover market

Huang, Chen (2021) Does CEO overconfidence matter for shareholders’ wealth? Evidence from the UK takeover market. International Journal of Banking Accounting and Finance, 12 (3). pp. 266-284. ISSN 1755-3830. E-ISSN 1755-3849. (Access to this publication is currently restricted. You may be able to access a copy if URLs are provided) (KAR id:87483)

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Abstract

This study examines how CEO overconfidence affects shareholders’ wealth (e.g., stock returns) in Merges and Acquisitions (M&As). The main measure adopted to link CEO overconfidence is based on whether a CEO holds stock options until the year before the expiration date. Using a sample of M&As in the UK, we document that acquiring firms’ stock returns are negatively affected around the announcement date if their CEOs are characterized by overconfidence. The results hold after addressing omitted variable concerns and using a propensity score matching (PSM) analysis. The findings are also robust to the implementation of the alternative measure of managerial overconfidence, such as media portrayal of CEOs. This study offers an important implication for firms to mitigate CEO overconfidence in order to protect the interests of shareholders.

Item Type: Article
Uncontrolled keywords: CEO overconfidence (hubris), M&As, stock options, shareholders’ wealth
Subjects: H Social Sciences
Divisions: Divisions > Kent Business School - Division > Department of Accounting and Finance
Depositing User: Chen Huang
Date Deposited: 07 Apr 2021 09:57 UTC
Last Modified: 10 Jan 2022 16:03 UTC
Resource URI: https://kar.kent.ac.uk/id/eprint/87483 (The current URI for this page, for reference purposes)
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