The document discusses the concept of managerial hubris, which refers to excessive pride or self-confidence held by senior managers that can lead to cognitive biases and poor decision making. Managerial hubris can result in empire building within an organization as managers seek to expand their power and influence. It is also related to mergers and acquisitions if acquiring company managers overestimate their ability to manage target companies. This can lead to winners' curse, where the winning bid exceeds the true value of the target. The hubris hypothesis suggests managerial hubris in acquisitions can result in bids over the intrinsic value and ultimately lower shareholder returns.

1. Managerial Hubris

2. Meaning of the word ‘Hubris’
‘Excessive Pride or Self-Confidence’
 Arrogance
 Conceit
 Haughtiness
 Pride
 Vanity
 Self-importance
 Self-conceit
 Pomposity
 Superciliousness
 Superiority
 Hauteur
 Big-headedness

3. What is Managerial Hubris?
Hubris prevalent in an organizational context
i.e. cognitive bias in the decision making process by a senior
official in an entity
Reasons/ Sources
 Situational conditions
 Congenital conditions

4. The act of building one’s own strong empire in an organization
i.e. the act to widespread the scope and/or size of a single person’s/
division’s power and influence
Empire building is strongly related to managerial hubris.
A manager with high managerial hubris might attempt an empire
building due to his excess pride, over self-confidence, over-belief and
over-dependent on his ability and desires
Empire Building

5. Managerial Hubris relating to Mergers and Acquisitions
It is the unrealistic or unworkable confidence retained by the officials
in a bidding company (probable acquirer) that they are better
equipped to manage the assets and the target entity (probable
acquire) more efficiently than how they are managed by the target
entity's present management.

6. Winner’s Curse
It is the situation when the bidder finally winning the bid due to his
higher bid price that exceeds the intrinsic value of the items under
auction.
Means:
 The bidder’s bid exceeding the value of the auctioned asset or
 The bidder ending up in a net gain but is worse off than anticipated
due to the actual value of the asset being less than what was
expected by the bidder

7. Hubris Hypothesis
This refers to the situation when the bidding company finally winning
the bid (which means it gets to acquire the target entity) due to its bid
price higher and exceeding the intrinsic value of the entity.

8. Outcomes of Hubris Hypothesis
 It is a Negative Energy
 It motivates Cognitive Bias
 It encourages to commit Errors of Over-optimism in evaluating
M&A opportunities
There is a negative relationship between managerial hubris and
shareholder returns

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