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:

Feudal System

A system of social stratification based on a hereditary nobility who were responsible for and served by a lower stratum of forced laborers called serfs.

Closed Social Hierarchy

A social structure where individuals' positions are fixed based on aspects like birth, with little opportunity for mobility.

Capitalist System

An economic system characterized by private or corporate ownership of capital goods, where investments, production, and distribution are driven by market forces.

Cultural Capital

Non-financial social assets such as education, intellect, style of speech, dress, or physical appearance that promote social mobility beyond economic means.