Mergers and Beliefs

Todd A. Brown, Thomas Zorn, Geoff Freissen

Research output: Contribution to journalArticle


We study the combined effects of managerial optimism and market overvaluation on merger premiums and the chosen form of payment. Our empirical results are consistent with market overvaluation and the target manager‘s optimism as having the most influence on mergers. The observed form of payment corresponds to the acquiring manager‘s preferences, suggesting that the acquiring manager dictates the method of payment. Lastly, our model demonstrates why cash mergers are more likely to be hostile, and provides an explanation for why a combination of cash plus stock may be optimal.

Original languageUndefined/Unknown
JournalFaculty Publications
StatePublished - Jan 1 2011

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