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The Winner's Curse & Private Firms

The Winner's Curse & Private Firms.

By James A. Brander and Edward J. Egan

The winner’s curse — overestimating the value of an asset and therefore overpaying — is often associated with acquisitions of publicly-traded firms but not with private acquisitions. Using an event study methodology for over 22,000 private acquisitions of U.S. firms between 1985 and 2015, the authors examine a possible winner’s curse for such acquisitions, testing variables to determine what characteristics make a private company more likely to overestimate the asset's value.

"The Winner's Curse in Acquisitions of Privately-held Firms" is published in The Quarterly Review of Economics and Finance. Click here to view a preview of the paper. The full version is available on a pay-per-view basis or by subscription.