Managerial hubris is the unrealistic belief held by managers in bidding firms that they can manage the assets of a target firm more efficiently than the target firm's current management.
Managerial hubris is one reason top managers, e.g., CEOs and board directors, may choose to invest in a
merger
Mergers and acquisitions (M&A) are business transactions in which the ownership of a company, business organization, or one of their operating units is transferred to or consolidated with another entity. They may happen through direct absorpt ...
that on average generates no
profit
Profit may refer to:
Business and law
* Profit (accounting), the difference between the purchase price and the costs of bringing to market
* Profit (economics), normal profit and economic profit
* Profit (real property), a nonpossessory inter ...
s.
[{{cite book, title=Strategic Management and Competitive Advantages, author=Jay B. Barney and William S. Hesterly, page]
380
publisher=Pearson Prentice Hall, date=2008, isbn=0-13-613520-X, url=https://archive.org/details/strategicmanagem0000barn/page/380
See also
*
Leveraged buyout
A leveraged buyout (LBO) is the acquisition of a company using a significant proportion of borrowed money (Leverage (finance), leverage) to fund the acquisition with the remainder of the purchase price funded with private equity. The assets of t ...
References
Management
Mergers and acquisitions