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Published July 13, 2017 | Accepted Version
Report Open

Empirical Evidence of Overbidding in M&A Contests


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.

Additional Information

The authors thank Fran├žois 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.

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Accepted Version - sswp1426.pdf


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January 13, 2024