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. Can the hubris hypothesis be a legitimate explanation for continuing acquisition activity?
Answer to relevant QuestionsSome firms publicize their corporate mission statements by including them in annual reports, on company letterheads, and in corporate advertising. What, if anything, does this practice say about the ability of these mission ...Will a firm with below average accounting performance over a long period of time necessarily go out of business? Examine the following corporate websites and determine if the strategies pursued by these firms were emergent, deliberate, or both emergent and deliberate. Justify your answers with facts from the websites.(a) ...It has been shown that so-called “poison pills” rarely prevent a takeover from occurring. In fact, sometimes when a firm announces that it is instituting a poison pill, its stock price goes up. Why?The transnational strategy is often seen as one way in which firms can avoid the limitations inherent in the local responsiveness/international integration trade-off. However, given the obvious advantages of being both ...
Post your question