Acquisitions as Lotteries: Do Managerial Gambling Attitudes Influence Takeover Decisions?

66 Pages Posted: 12 Oct 2011

See all articles by Christoph Schneider

Christoph Schneider

Universität Münster

Oliver G. Spalt

University of Mannheim - Business School; European Corporate Governance Institute (ECGI)

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Date Written: October 12, 2011


This paper analyzes takeover announcements for public US targets from 1987 to 2008. Consistent with the hypothesis that gambling attitudes matter for takeover decisions, both acquiror announcement returns and expected synergies are lower in acquisitions where the target's stock has characteristics similar to those of attractive gambles. Offer price premium and target announcement returns are higher in these deals. The effects are stronger in companies where managers are more entrenched, where the disciplining force of product market competition is lower, where recent acquiror performance has been poor, during economic downturns, for younger CEOs in the acquiring firm, and for acquirors headquartered in areas in which local gambling propensity is higher. Targets with lottery features are more likely to receive takeover bids and direct evidence from synergy disclosure data shows that the market reacts less favorably to higher synergy forecasts if they are issued in the context of a lottery acquisition. Overall, our results suggest that corporate acquisitions are influenced by managerial gambling attitudes and that value destruction for acquirors in gambling-related transactions is substantial.

Keywords: Mergers and Acquisitions, Gambling, Managerial Biases

JEL Classification: G34, G14, G3

Suggested Citation

Schneider, Christoph and Spalt, Oliver G., Acquisitions as Lotteries: Do Managerial Gambling Attitudes Influence Takeover Decisions? (October 12, 2011). Paris December 2011 Finance Meeting EUROFIDAI - AFFI, Available at SSRN: or

Christoph Schneider (Contact Author)

Universität Münster ( email )

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Münster, 48143
+492518322088 (Phone)

Oliver G. Spalt

University of Mannheim - Business School ( email )

L5, 5
Mannheim, 68131

European Corporate Governance Institute (ECGI) ( email )

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels

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