Abstract

This research empirically explored the applicability of hubris hypothesis in explaining mergers and acquisitions within Nigerian publicly listed companies. Specifically, the study examined whether hubris hypothesis impacts on corporate takeover on Nigerian listed firms. As a result of the type of the empirical work, secondary data was employed, and daily stock price data was used. Since the research focused on merger between Flour Mills PLC (acquiring firm) and Nigerian Bag Manufacturing Company PLC (target firm), the constant market model method was used to analyze abnormal returns. The empirical findings provide evidence of hubris, indicating managerial irrationality and overconfidence in the merger process. The study reveals statistically significant abnormal returns (AR) and cumulative abnormal returns (CAR) respectively on the announcement day, and after the announcement. As a recommendation, the study suggests the need for careful and efficient execution of the bid proposition during pre and post-synchronization stages to mitigate the abrupt negative impacts on stock performance. The study as well recommends proper market information dissemination on the proposed M &As, as this will help balance the optimal benefits derivable in terms of potential economies of scale, thereby minimizing agency problems.