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CEO social status and M&A decision making

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  • Plaksina, Yulia
  • Gallagher, Liam
  • Dowling, Michael

Abstract

Our study demonstrates the impact of CEO ascribed and achieved social status on M&A decision making and shows the firm value consequences from acquisition deals announced by executives with various status levels. Both ascribed (measured through prestigious education) and achieved (measured through receiving awards) social status are shown to be associated with reduced M&A activity and the effect is strongest among executives who possess both status types simultaneously. However, while the influence of ascribed status is permanent, higher achieved status reduces CEO acquisitiveness only in the immediate aftermath of receiving this status boost. Furthermore, while ascribed status has no significant impact on immediate announcement returns, possessing high achieved social status results in significant value destruction around deal announcements.

Suggested Citation

  • Plaksina, Yulia & Gallagher, Liam & Dowling, Michael, 2019. "CEO social status and M&A decision making," International Review of Financial Analysis, Elsevier, vol. 64(C), pages 282-300.
    • Handle: RePEc:eee:finana:v:64:y:2019:i:c:p:282-300
    DOI: 10.1016/j.irfa.2019.06.006
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    More about this item

    Keywords

    Mergers and acquisitions; Managerial biases; Social status; Nearest neighbor matching; Event study;
    All these keywords.

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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