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Empirical Evidence of Overbidding in M&A Contests

de Bodt, Eric and Cousin, Jean-Gabriel and Roll, Richard (2016) Empirical Evidence of Overbidding in M&A Contests. Social Science Working Paper, 1426. California Institute of Technology , Pasadena, CA. (Unpublished)

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Surprisingly few papers have attempted to develop a direct empirical test for overbidding in M&A contests. We develop such a test grounded on a necessary condition for profit maximizing bidding behavior. The test is not subject to endogeneity concerns. Our results strongly support the existence of overbidding. We provide evidence that overbidding is related to conflicts of interest, but also some indirect evidence that it arises from failing to fully account for the winner’s curse.

Item Type:Report or Paper (Working Paper)
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Additional Information:The authors thank François Derrien (HEC Paris), Espen Eckbo (Dartmouth College), Jarrad Harford (Washington University), Karin Thorburn (NHH) for their helpful comments as well as participants of Dauphine Finance Seminar, ECCCS Monday Finance Seminar, AFFI, Belgian Corporate Finance Day and EFMA conferences.
Group:Social Science Working Papers
Subject Keywords:mergers and acquisitions; hubris hypothesis; overbidding
Series Name:Social Science Working Paper
Issue or Number:1426
Classification Code:JEL classification: G34
Record Number:CaltechAUTHORS:20170707-101356502
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Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:78846
Deposited By: Hanna Storlie
Deposited On:13 Jul 2017 17:00
Last Modified:03 Oct 2019 18:12

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