All of the Following Are True of Overconfident CEOs EXCEPT

question 48

Multiple Choice

All of the following are true of overconfident CEOs EXCEPT

• A) overconfident CEOs tend to charge ahead with mergers and acquisitions even though they are aware that most acquisitions destroy shareholder value.
• B) overconfident CEOs view their company as undervalued by outside investors.
• C) overconfident CEOs are more likely to do deals that diversify their firm's lines of businesses.
• D) the overconfidence of CEOs may lead to hubris.
• E) overconfident CEOs were less likely to make an acquisition when they could avoid selling new stock to finance them.

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Definitions:

Senior Debt

Debt that takes precedence over other unsecured or junior debt owed by the issuer in terms of the order of payment in the event of a liquidation.

Junk Bond

A high-yield but high-risk bond issued by companies or municipalities considered to be at greater risk of default than more secure investment-grade bonds.

Interest Rate

The percentage of a sum of money charged for its use, typically expressed as an annual percentage rate.

Convertible Debt

A type of bond or loan that can be converted into a predetermined amount of the company's equity at certain times during its life, usually at the discretion of the bondholder.