CEO overconfidence, CEO dominance and corporate acquisitions

This study investigates the role of CEO overconfidence (hubris) and CEO dominance in the firm's decision to undertake an acquisition. We argue that it is important to capture not only the extent of overconfidence but also the ability of the CEO to impose his or her views on the firm's decisions. We test this approach using logistic regression and Australian data. The results suggest that both CEO overconfidence and CEO dominance are important in explaining the decision to acquire another firm. When compared to existing US studies, the evidence on CEO overconfidence is robust across two different financial and corporate governance systems. Our results also indicate that CEO dominance is at least as significant as CEO overconfidence in the decision to undertake an acquisition.