Research shows that in times of high or increasing stock prices, due diligence is relaxed and firms often overpay for acquistions and the long-run performance of the newly formed form suffers.

Question

Quizplus · Accepted Answer

This statement is supported by research and has been observed in various studies. In times of high or increasing stock prices, companies may become overconfident and neglect to conduct thorough due diligence before making an acquisition. As a result, they may pay more than the target company is worth, and the long-term performance of the merged company may suffer.

Research Shows That in Times of High or Increasing Stock