Study: Cocky CEOs make risky investments | On Call

July 12, 2013 by Sony Salzman

University of Missouri-Colombia researcher Stephen Ferris warns investors to watch out for over-confident CEOs, warning that cocky leaders often make business decisions that aren’t in the best interest of their companies.

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MASSDEVICE ON CALL — Stephen Ferris, finance professor at the University of Michigan, led a study examining corporate merger and acquisition patterns, concluding that over-confident CEOs often put their companies at risk.

Ferris cautioned investors to consider a CEO's personality when shopping for a new interest, and that companies with over-confident CEOs maintain independent boards of directors.

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One of the ways that cocky CEOs may endanger their businesses is by betting on risky acquisitions that don't complement the company's core line, according to the study.

"Generally speaking, mergers that diversify companies don't work," Ferris said in prepared remarks.

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