Journal of Financial and Quantitative Analysis

Research Articles

CEO Overconfidence and International Merger and Acquisition Activity

Stephen P. Ferrisa1, Narayanan Jayaramana2 and Sanjiv Sabherwala3

a1, Trulaske College of Business, University of Missouri, 404F Cornell Hall, Columbia, MO 65211;

a2, Scheller College of Business, Georgia Institute of Technology, 800 W Peachtree NW, Atlanta, GA 30308;

a3, College of Business, University of Texas at Arlington, Box 19449, Arlington, TX 76019.


This study examines the role that chief executive officer (CEO) overconfidence plays in an explanation of international mergers and acquisitions during the period 2000–2006. Using a sample of CEOs of Fortune Global 500 firms over our sample period, we find that CEO overconfidence is related to a number of critical aspects of international merger activity. Overconfidence helps to explain the number of offers made by a CEO, the frequencies of nondiversifying and diversifying acquisitions, and the use of cash to finance a merger deal. Although overconfidence is an international phenomenon, it is most extensively observed in individuals heading firms headquartered in Christian countries that encourage individualism while de-emphasizing long-term orientation in their national cultures.