The Role of Anomalies in the Behavior of the CEO in M&A Transactions

Student: Morenkova Anna

Educational Programme: Corporate Finance (Master)

Year of Graduation: 2018

Recent research has shown negative cumulative abnormal return for acquirers during M&A deals. There are attempts to explain this result by irrational behavior of managers, particularly by managerial overconfidence. In this study, we explore CAR for 79 deals in Russia during 2010-2017 and find that 11-day CAR is insignificantly different from zero, while 41-day CAR is negative in the range from -2.57% to -3.42%. We model overconfidence by CEO press portrayal, company acquisition frequency and superior performance. Our findings indicate that confident CEO press portrayal and later deal order impact average CAR negatively on a short event window, however, single acquirers get higher returns from later deals on a long window. Superior ROA and revenue growth rate have a negative impact on returns. Therefore, there is evidence of negative overconfidence impact on M&A deals in Russia.

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