Market optimism and merger waves

Klaus Gugler, Dennis C. Mueller, Michael Weichselbaumer, Burcin B. Yurtoglu

Publication: Scientific journalJournal articlepeer-review


We argue that stock and bond market booms and merger waves are both driven by increases in optimism in financial markets and discuss two behavioral hypotheses, the managerial discretion and overvaluation hypotheses that claim that merger waves are driven by market optimism. Empirical support for the managerial theory is provided by evidence that the amounts of assets acquired increase as optimism in financial markets increases and that the returns to acquiring companies are inversely related to market optimism at the time of mergers. Our measures of market optimism also explain managerial choices of finance for mergers.
Original languageEnglish
Pages (from-to)159 - 175
JournalManagerial and Decision Economics
Publication statusPublished - 2012

Austrian Classification of Fields of Science and Technology (ÖFOS)

  • 502013 Industrial economics

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