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Deal or No Deal: Hormones and the Mergers and Acquisitions Game

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Author Info

  • Maurice Levi

    ()
    (Sauder School of Business, University of British Columbia, Vancouver, British Columbia V6T 1Z2, Canada)

  • Kai Li

    ()
    (Sauder School of Business, University of British Columbia, Vancouver, British Columbia V6T 1Z2, Canada)

  • Feng Zhang

    ()
    (Sauder School of Business, University of British Columbia, Vancouver, British Columbia V6T 1Z2, Canada)

Abstract

Young male CEOs appear to be combative: they are 4% more likely to be acquisitive and, having initiated an acquisition, they are over 20% more likely to withdraw an offer. Furthermore, a young target male CEO is 2% more likely to force a bidder to resort to a tender offer. We argue that this combative nature is a result of testosterone levels that are higher in young males. Testosterone, a hormone associated with male dominance seeking, has been shown to influence prospects for a cooperative outcome of the ultimatum game. Specifically, high-testosterone responders tend to reject low offers even though this is against their interest. It has been argued that this is consistent with a low offer being seen as dominance seeking. The acts of attempting or resisting an acquisition can be viewed as striving to achieve dominance. We argue that the evidence reported in this paper is consistent with the presence of a significant hormone effect in mergers and acquisitions.

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File URL: http://dx.doi.org/10.1287/mnsc.1100.1206
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Bibliographic Info

Article provided by INFORMS in its journal Management Science.

Volume (Year): 56 (2010)
Issue (Month): 9 (September)
Pages: 1462-1483

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Handle: RePEc:inm:ormnsc:v:56:y:2010:i:9:p:1462-1483

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Related research

Keywords: mergers and acquisitions; male dominance seeking; CEO testosterone; bid initiation; bid withdrawal; tender offers;

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Cited by:
  1. Nikolai Roussanov & Pavel G. Savor, 2012. "Status, Marriage, and Managers' Attitudes To Risk," NBER Working Papers 17904, National Bureau of Economic Research, Inc.
  2. Li, Xiaoyang & Low, Angie & Makhija, Anil K., 2011. "Career Concerns and the Busy Life of the Young CEO," Working Paper Series 2011-4, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  3. Dai, Yun & Gryglewicz, Sebastian & Smit, Han T.J. & De Maeseneire, Wouter, 2013. "Similar bidders in takeover contests," Games and Economic Behavior, Elsevier, vol. 82(C), pages 544-561.

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