Regressions of the total abnormal stock return received by the stockholders of the first bidder firm (Premiumib) on the pre-bid runup for the target firm (Runupi) and for the bidder firm (Runupib) for various samples of successful mergers and tender offers for exchange-listed target firms, 1975-91:

Premiumib = a + b Runupib + c Runupi + ui,

where Premiumib = Runupib + Markupib. Runupib (Runupi) is the cumulative abnormal return to the bidder's (target's) stock from day -42 to day -1 relative to the first bid. Markupib is the cumulative abnormal return to the bidder's stock from the day of the first bid through delisting or 126 trading days after the first bid, whichever comes first. This regression shows the effect of pre-bid runup in the target's stock price on the price of the bidder's stock. If the hubris hypothesis that bidders pay too much is related to the size of the target's runup, the estimates of c should be reliably negative. S(u) is the standard error of the regression and Rsquared is the adjusted coefficient of determination. White's (1980) heteroskedasticity-consistent standard errors are used to compute the t-statistics.