What term refers to the management of the acquired firm being too optimistic about the value than can be created via an acquisition and is thus willing to pay a significant premium over a target firm's market capitalization?
A)The optimistic hypothesis
B)Managerial thinking
C)The hubris hypothesis
D)Managerial potential
E)Managerial optimism

Question

Quizplus · Accepted Answer

The term that refers to the management of the acquired firm being too optimistic about the value that can be created via an acquisition and is thus willing to pay a significant premium over a target firm's market capitalization is "the hubris hypothesis". This term suggests that managerial overconfidence and an exaggerated belief in their ability to create value through the acquisition leads them to pay more than the target firm's worth.

What Term Refers to the Management of the Acquired Firm