Implications for bidding firms

Reference no: EM133284428

Question: The hubris hypothesis suggests that managers continue to engage in acquisitions, even though, on average, they do not generate economic profits, because of the unrealistic belief on the part of these managers that they can manage a target firm's assets more efficiently than that firm's current management. This type of systematic irrationality usually does not last too long in competitive market conditions: Firms led by managers with these unrealistic beliefs change, are acquired, or go bankrupt in the long run. What are the attributes of the market for corporate control that suggest that managerial hubris could exist in this market, despite its performance-reducing implications for bidding firms?

Reference no: EM133284428

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