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Beware the Winner's Curse
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Beware the Winner's Curse: Victories that Can Sink You and Your Company

G. Anandalingam and Henry C. Lucas

Abstract

In the case of an acquisition or a merger, it is very often the case that when an individual or company perceives itself to be the winner, subsequent events will show that the victory was overvalued. Both psychological and market based forces often lead managers to greatly overestimate what they are buying, resulting in the “winner’s curse”. In an effort to grow their companies, competitive and overly confident managers with high compensation packages make rash decisions. The pressure put on values by the stock market, stock analysts, and investment bankers is coupled with the presence of a bi ... More

Keywords: mergers, acquisitions, hubris, managerial optimism, compensation, growth pressures, bidding psychology, investment banking, stock

Bibliographic Information

Print publication date: 2004 Print ISBN-13: 9780195177404
Published to Oxford Scholarship Online: September 2007 DOI:10.1093/acprof:oso/9780195177404.001.0001

Authors

Affiliations are at time of print publication.

G. Anandalingam, author
Author Webpage

Henry C. Lucas, author
both at the Robert H. Smith School of Business, University of Maryland

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