IDEAS home Printed from https://ideas.repec.org/a/mes/emfitr/v51y2015is5ps46-s63.html
   My bibliography  Save this article

Mergers, CEO Hubris, and Cost Stickiness

Author

Listed:
  • Daecheon Yang

Abstract

Hubris theory documents that bidder CEOs are overconfident about deal synergies without fearing the winner’s curse. We examine the role of bidder CEOs’ hubris over merger synergies on cost stickiness in the rapidly growing Korean market. Bidder CEOs who overestimate the merged firm’s growth retain more underutilized-capacity when sales decrease than do CEOs of stand-alone firms. Optimistic bidder CEOs induce greater cost stickiness through strong and irrational self-beliefs than do optimistic nonbidder CEOs. Given the learning and self-attribution effect, optimistic bidder CEOs who experience more successful operating synergies induce stickier costs than less successful CEOs with simply optimistic views. Implications for possible overslack and cost locking from bidder CEOs’ hubris are also discussed.

Suggested Citation

  • Daecheon Yang, 2015. "Mergers, CEO Hubris, and Cost Stickiness," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 51(S5), pages 46-63, September.
    • Handle: RePEc:mes:emfitr:v:51:y:2015:i:s5:p:s46-s63
    DOI: 10.1080/1540496X.2015.1062313
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1080/1540496X.2015.1062313
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/1540496X.2015.1062313?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jeongseok Song & Daecheon Yang & Soonwon Kwon, 2017. "Fdi Consequences Of Downward Wage–Cost Rigidities," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 62(05), pages 1223-1244, December.
    2. Jeon, Heung-Jae, 2024. "CEO narcissism and asymmetric cost behavior," The North American Journal of Economics and Finance, Elsevier, vol. 70(C).
    3. Ibrahim, Awad Elsayed Awad & Ali, Hesham & Aboelkheir, Heba, 2022. "Cost stickiness: A systematic literature review of 27 years of research and a future research agenda," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 46(C).
    4. Yang, Daecheon & Song, Jeongseok, 2018. "Impact of wage rigidity on sovereign credit rating," Emerging Markets Review, Elsevier, vol. 34(C), pages 25-41.
    5. Khedmati, Mehdi & Sualihu, Mohammed Aminu & Yawson, Alfred, 2020. "CEO-director ties and labor investment efficiency," Journal of Corporate Finance, Elsevier, vol. 65(C).
    6. Jennifer Kunz & Lara Sonnenholzner, 2023. "Managerial overconfidence: promoter of or obstacle to organizational resilience?," Review of Managerial Science, Springer, vol. 17(1), pages 67-128, January.
    7. Evans Opoku‐Mensah & Yuming Yin, 2023. "Controlling shareholders' influence on acquisition decisions and value creation: An empirical study from China," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1965-1980, April.
    8. Naoum, Vasilios-Christos & Ntounis, Dimitrios & Papanastasopoulos, Georgios & Vlismas, Orestes, 2023. "Asymmetric cost behavior: Theory, meta-analysis, and implications," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 53(C).
    9. Yang, Daecheon & Koo, Jeong-Ho & Kim, Jaemin, 2023. "The role of venture capitalist monitoring in mitigating cost stickiness: Evidence from Korea's IPO market," Finance Research Letters, Elsevier, vol. 52(C).
    10. Chune Young Chung & Changhwan Choi & Amirhossein Fard, 2024. "Self‐serving attribution and managerial investment decision," Bulletin of Economic Research, Wiley Blackwell, vol. 76(3), pages 749-772, July.
    11. Le, Anh-Tuan & Tran, Thao Phuong & Cheng, Tzu-Chang Forrest, 2022. "Do female directors mitigate asymmetric cost behavior? Evidence from international data," Finance Research Letters, Elsevier, vol. 49(C).
    12. Wanjiao Jia & Ting Yang & Xin Zhang, 2023. "The rise of robots and the fall of cost stickiness: Evidence from Chinese manufacturers," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(3), pages 3147-3171, September.
    13. Yang, Daecheon & Kim, Hyuntae, 2020. "Managerial overconfidence and manipulation of operating cash flow: Evidence from Korea✰," Finance Research Letters, Elsevier, vol. 32(C).

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:mes:emfitr:v:51:y:2015:i:s5:p:s46-s63. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/MREE20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.