The Impact of Market-Nurtured Optimism on Mergers:

Pei Gi Shu; Yin-Hua Yeh; Shean Bii Chiu; Li Hui Wang

doi:10.1142/S0219091513500215

The Impact of Market-Nurtured Optimism on Mergers:

Pei Gi Shu, Yin-Hua Yeh, Shean Bii Chiu, Li Hui Wang^*

^*Corresponding author for this work

Department of Information Management and Finance

Research output: Contribution to journal › Article › peer-review

3 Scopus citations

Abstract

We create a novel measure of market-nurtured optimism in that managers become more optimistic if the market had responded more favorably, and to a larger extent to positive earnings surprises, than to negative earnings surprises. These market-nurtured managers are prone to engage in value-destructive mergers. The inclination is further reinforced by abundant internal cash. In contrast, a good governance structure mitigates the odds of engaging in mergers and the detrimental effect associated with mergers. The acquisitions launched by overconfident managers are associated with lower market value.

Original language	English
Article number	1350021
Journal	Review of Pacific Basin Financial Markets and Policies
Volume	16
Issue number	3
DOIs	https://doi.org/10.1142/S0219091513500215
State	Published - 1 Sep 2013

Keywords

Overconfidence
corporate governance
mergers

UN SDGs

This output contributes to the following Sustainable Development Goal(s)

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The Impact of Market-Nurtured Optimism on Mergers:

Abstract

Keywords

UN SDGs

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