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Cultural Values, CEO Risk Aversion and Corporate Takeovers

  • Thorsten Lehnert

    ()

    (Luxembourg School of Finance, University of Luxembourg)

  • Bart Frijn

    ()

    (AUT University, NZ)

  • Aaron Gilbert
  • Alireza Tourani-Rad

We explicitly examine the role of culture in corporate takeover decisions. Prior research suggests that the risk aversion of CEOs affects their takeover decisions. In this paper, we argue that managerial risk aversion at a national level is a cultural trait and affects the net synergies. CEOs of firms located in countries with higher level of risk aversion, measured by Hofstede’s (2001) uncertainty avoidance score, show less takeover activity, engage more in diversifying takeovers and require higher premiums on takeovers. Required net synergies are higher for smaller firms, relatively larger deals, and for firms that engage in more takeover activity. "Keywords: Financial Decision Making; Risk Aversion; Synergies; Culture; Takeovers." "Classification-JEL: D81; G34; M14."

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Paper provided by Luxembourg School of Finance, University of Luxembourg in its series LSF Research Working Paper Series with number 11-01.

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Date of creation: 2011
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Handle: RePEc:crf:wpaper:11-01
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