Creating more accurate acquisition valuations

Managers often must make decisions about complex strategic issues, and they are expected to make choices carefully and objectively. The psychology of judgment and decision making predicts that the way executives frame their deals partly determines their acquisition choices under uncertainty. This research draws on the marriage of behavioral economics and corporate finance to develop ways of improving acquisition decision making under uncertainty. In the field of behavioral economics, we conducted experimental and archival research. The work implies that acquisition strategy is vulnerable to the way managers perceive risk and losses, judgment biases in their strategy, the bidding behavior of rivals and mispricing in financial markets