The hubris hypothesis suggests that managers continue to engage in
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 non-rationality 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?

Membership TRY NOW
  • Access to 800,000+ Textbook Solutions
  • Ask any question from 24/7 available
    Tutors
  • Live Video Consultation with Tutors
  • 50,000+ Answers by Tutors
OR
Relevant Tutors available to help