The Management of an Acquiring Firm Is Often Too Optimistic

question 11

Multiple Choice

The management of an acquiring firm is often 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.This is known as the _____ and is the reason why acquisitions fail.

• A) bandwagon effect
• B) Fisher effect
• C) hubris hypothesis
• D) international Fisher effect
• E) learning effect

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Definitions:

Corrective Taxes

Taxes designed to influence market outcomes by correcting for the effects of externalities, encouraging or discouraging certain behaviors.

Regulations

Rules or directives made and maintained by an authority to regulate behavior, often in professional settings, industries, or governmental areas.

Optimal Level

The most efficient, effective, or desirable point or degree for a specific outcome.

Pollution

The contamination of natural environments by harmful substances or activities.