In Too Deep: The Effect of Sunk Costs on Corporate Investment

• 成果类型: Article
• 署名作者: Guenzel, Marius
• 署名单位: University of Pennsylvania
• 刊物名称: JOURNAL OF FINANCE
• ISSN/ISSBN: 0022-1082
• DOI: 10.1111/jofi.13430
• 发表日期: 2025
• 页码: 1593-1646
• 关键词: ceo overconfidence; mergers; MARKET; disposition; prices; acquisitions; COMMITMENT; regression; investors; DECISION

摘要

Sunk costs are unrecoverable costs that should not affect decision making. I provide evidence that firms systematically fail to ignore sunk costs and that this leads to significant investment distortions. In fixed-exchange-ratio stock mergers, aggregate market fluctuations after parties enter into a binding merger agreement induce plausibly exogenous variation in the final acquisition cost. These quasi-random cost shocks strongly predict firms' commitment to an acquired business following deal completion, with an interquartile cost increase reducing subsequent divestiture rates by 8% to 9%. Consistent with an intrapersonal sunk cost channel, distortions are concentrated in firm-years in which the acquiring CEO is still in office.