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

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.