The Endowment Effect in Corporate M&A Premium
DOI:
https://doi.org/10.54097/hbem.v21i.13730Keywords:
Endowment effect; premium; multiple regression.Abstract
The endowment effect is widespread in trading, often happened in the fact that the owner of a thing rates the thing more valuable than the non-owner. In this paper, 641 M&A events of listed companies in the United States are used as a sample to carry out multiple regression analysis to study the existence of endowment effect and its impact on M&A premium. According to the results of multiple regression an endowment effect exactly exists in the process of corporate M&A, and this effect significantly increases the M&A premium. The impact of endowment effects on M&A premiums in M&A events of companies in different industries is different. The impact of endowment effect in M&A of emerging industry companies is more prominent. It is recommended that the acquirer should fully consider the increased M&A costs due to the influences endowment effect when acquiring another company; Formulators consider the impact of endowment effect on the efficiency of industrial integration.
Downloads
References
Elsevier. (1980). Journal of economic behavior and organization. Professional Geographer, 40(1), 103–124.
Bischoff, I. (2008). Endowment effect theory, prediction bias and publicly provided goods: an experimental study. Environmental & Resource Economics, 39(3), 283-296.
Dijk, E. V., & Knippenberg, D. V. (1996). Buying and selling exchange goods: loss aversion and the endowment effect. Journal of Economic Psychology, 17(4), 517-524.
Andrea, Isoni, Graham, Loomes, and, & Robert, et al. (2011). The willingness to pay-willingness to accept gap,the "endowment effect," subject misconceptions, and experimental procedures for eliciting valuations: comment. The American economic review, 101(2), 991-1011.
Loewenstein, G, & Issacharoff, S. (2010). Source dependence in the valuation of objects. Journal of Behavioral Decision Making, 7(3).
Martinez, L. F., Zeelenberg, M., & Rijsman, J. B. (2011). Regret, disappointment and the endowment effect. Journal of Economic Psychology, 32(6), 962-968.
Strahilevitz, M. A, & George, L. The effect of ownership history on the valuation of objects. Journal of Consumer Research (3), 276-289.
Lin, C. H., Chuang, S. C., Kao, D. T., & Kung, C. Y. (2006). The role of emotions in the endowment effect. Journal of Economic Psychology, 27(4), 589-597.
Lichtenstein, S., & Slovic, P. (2006). The construction of preference || libertarian paternalism is not an oxymoron., 10.1017/CBO9780511618031(38), 689-708.
LI Ling, & ZHU Yu. (2008). The Impact of Fair Value Uncertainty on M&A Results: An Analysis of M&A Outcomes under Non-Common Control. Audit and Economic Studies (4), 3.
CHENG Fengchao, LIU Xu, & Wen Wen. (2013). Research on the relationship between asset value evaluation and transaction pricing of M&A targets of listed companies. Accounting Research (8), 7.
Wen Riguang. (2015). Risk concept, M&A premium and M&A completion rate. Journal of Financial Studies (8), 16.
Renée Adams, Almeida, H., & Ferreira, D. (2009). Understanding the relationship between founder-ceos and firm performance. Journal of Empirical Finance, 16(1), 136-150.
Strahilevitz, M. A., & Loewenstein, G. (1998). Effect of ownership history on the valuation of objects | journal of consumer research | oxford academic. Journal of Consumer Research, 25(3), 276-289.
Lichtenstein, S., & Slovic, P. (2006). The construction of preference libertarian paternalism is not an oxymoron., 10.1017/CBO9780511618031(38), 689-708.
Reb, J., & Connolly, T. (2007). Possession, feelings of ownership and the endowment effect. Judgment & Decision Making, 2(2), 107-114.
Downloads
Published
Issue
Section
License
This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License.
