Win-Stay, Lose-Shift: A Strategy of Serial Acquirers

Sreedhar T. Bharath; DuckKi Cho; Lyungmae Choi

Win-Stay, Lose-Shift: A Strategy of Serial Acquirers

Sreedhar T. Bharath
, DuckKi Cho
, Lyungmae Choi

Department of Accountancy

Research output: Conference Papers › RGC 32 - Refereed conference paper (without host publication) › peer-review

Abstract

We show that serial acquirers are likely to repeat (avoid) strategies that produced good (bad) outcomes in the past. This behavior cannot be explained by rational learning because serial acquirers with positive (negative) return experiences are more likely to initiate value-destroying (value-enhancing) mergers in terms of both market reaction and operating performance. We also discover that, following successful acquisition, higher institutional ownership mitigates excessive acquisitiveness of serial acquirers; after bad outcomes, financial expertise on corporate boards helps identify value-enhancing deals. Finally, past successes lead to future mergers by increasing managers’ confidence, whereas negative experiences directly curb firms’ acquisitiveness.

Original language	English
Publication status	Published - Jun 2019
Event	European Financial Management Association 2019 Annual Meetings - University of Azores, Ponta Delgada, Portugal Duration: 26 Jun 2019 → 29 Jun 2019 https://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2019-Azores/2019%20meetings.php

Meeting

Meeting	European Financial Management Association 2019 Annual Meetings
Place	Portugal
City	Ponta Delgada
Period	26/06/19 → 29/06/19
Internet address	https://www.efmaefm.org/0EFMAMEETINGS/EFMA%20ANNUAL%20MEETINGS/2019-Azores/2019%20meetings.php

Bibliographical note

Research Unit(s) information for this publication is provided by the author(s) concerned.

Research Keywords

Serial Acquirers
Mergers and Acquisitions
Corporate Governance
Reinforcement Learning
Overconfidence

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@conference{c49d1dc2dbc24a7597a793e1d695daed,

title = "Win-Stay, Lose-Shift: A Strategy of Serial Acquirers",

abstract = "We show that serial acquirers are likely to repeat (avoid) strategies that produced good (bad) outcomes in the past. This behavior cannot be explained by rational learning because serial acquirers with positive (negative) return experiences are more likely to initiate value-destroying (value-enhancing) mergers in terms of both market reaction and operating performance. We also discover that, following successful acquisition, higher institutional ownership mitigates excessive acquisitiveness of serial acquirers; after bad outcomes, financial expertise on corporate boards helps identify value-enhancing deals. Finally, past successes lead to future mergers by increasing managers{\textquoteright} confidence, whereas negative experiences directly curb firms{\textquoteright} acquisitiveness.",

keywords = "Serial Acquirers, Mergers and Acquisitions, Corporate Governance, Reinforcement Learning, Overconfidence",

author = "Bharath, \{Sreedhar T.\} and DuckKi Cho and Lyungmae Choi",

note = "Research Unit(s) information for this publication is provided by the author(s) concerned.; European Financial Management Association 2019 Annual Meetings ; Conference date: 26-06-2019 Through 29-06-2019",

year = "2019",

month = jun,

language = "English",

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TY - CONF

T1 - Win-Stay, Lose-Shift

T2 - European Financial Management Association 2019 Annual Meetings

AU - Bharath, Sreedhar T.

AU - Cho, DuckKi

AU - Choi, Lyungmae

N1 - Research Unit(s) information for this publication is provided by the author(s) concerned.

PY - 2019/6

Y1 - 2019/6

N2 - We show that serial acquirers are likely to repeat (avoid) strategies that produced good (bad) outcomes in the past. This behavior cannot be explained by rational learning because serial acquirers with positive (negative) return experiences are more likely to initiate value-destroying (value-enhancing) mergers in terms of both market reaction and operating performance. We also discover that, following successful acquisition, higher institutional ownership mitigates excessive acquisitiveness of serial acquirers; after bad outcomes, financial expertise on corporate boards helps identify value-enhancing deals. Finally, past successes lead to future mergers by increasing managers’ confidence, whereas negative experiences directly curb firms’ acquisitiveness.

AB - We show that serial acquirers are likely to repeat (avoid) strategies that produced good (bad) outcomes in the past. This behavior cannot be explained by rational learning because serial acquirers with positive (negative) return experiences are more likely to initiate value-destroying (value-enhancing) mergers in terms of both market reaction and operating performance. We also discover that, following successful acquisition, higher institutional ownership mitigates excessive acquisitiveness of serial acquirers; after bad outcomes, financial expertise on corporate boards helps identify value-enhancing deals. Finally, past successes lead to future mergers by increasing managers’ confidence, whereas negative experiences directly curb firms’ acquisitiveness.

KW - Serial Acquirers

KW - Mergers and Acquisitions

KW - Corporate Governance

KW - Reinforcement Learning

KW - Overconfidence

M3 - RGC 32 - Refereed conference paper (without host publication)

Y2 - 26 June 2019 through 29 June 2019

ER -

Win-Stay, Lose-Shift: A Strategy of Serial Acquirers

Abstract

Meeting

Bibliographical note

Research Keywords

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