Acquisition Experience and the Winner’s Curse in Corporate Acquisitions

The winner’s curse describes the behavioural phenomenon that the winner of a bidding contest pays a price that is too high. This paper shows that experiential learning cannot prevent a winner’s curse on the market of corporate control as acquiring firms with acquisition experience still pay a higher price for the target in a bidding contest. Acquisition experience, however, is related to a superior post-acquisition performance of the winning firm after acquisitions associated with a bidding contest.

Arroyabe, Marta and Katrin Hussinger (2024), Acquisition Experience and the Winner’s Curse in Corporate Acquisitions, Applied Economics 56(27) , 3247-3261