Manag., December-2019 – Q36
- Option : C
- Explanation : Hubris: Richard Roll in 1986 spelled out his hubris hypothesis for merger activity. Hubris means over-weaning self-confidence or, less
kindly, arrogance. Managers commit errors of over-optimism in evaluating merger opportunities due to excessive pride or faith in their own abilities. The suggestion is that
some acquirers do not learn from their mistakes and maybe convinced that they can see an undervalued firm when others cannot. They may also think that they have
the talent, experience, and entrepreneurial flair to shake up a business and generate improved profit performance.
Note that the hubris hypothesis does not require the conscious pursuit of self-interest by managers. Th ey may have worthy intentions but can make mistakes in judgment.
