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Snap Judgment: When to Trust Your Instincts, When to Ignore Them, and How to Avoid Making Big Mistakes with Your Money by David E. Adler

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29. CEO Hubris

Another pitfall of CEO behavior is overconfidence—which is really just a measured way of describing their extreme hubris. CEOs, by definition, have had a lot of success in their lives, certainly by the time they are CEOs. This can cross over into a feeling of invincibility, with their corporations—and investors—paying the price.

This largely psychological explanation has been put forward as to why the “urge to merge” is so widespread among CEOs, even though it is widely documented that mergers and acquisitions are generally bad news for the acquiring company, immensely bad. Subsequent to a merger, companies typically display negative returns, abnormally negative returns. The destruction to shareholder value is outrageous: Declines ...

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