Topic: Imprints from CEOs’ Early Experiences of Macro Acquisition Activity and Subsequent Propensity to Acquire

Speaker: Prof. HUANG Zhi, University of Kentucky

Host: Prof. WANG Song

Tim: 9:30-10:30 December 9th, 2016 (Friday)

Venue: Room 1002

Abstract: It is an enigma that acquisitions continue to increase in popularity despite their high failure rate. Does the high failure rate of acquisitions really not deter CEOs from pursuing them? We seek to provide a partial answer by proposing a two-component theory to explain the influence of the high failure rate of acquisitions on CEOs’ perception of acquisitions as a strategic tool. First, the level of macro acquisition activity influences the availability of information cues about acquisitions’ high failure rate for CEOs. Second, CEOs’ career transition from middle management to the executive position motivates them to heed information cues about acquisitions. Together, these two components suggest the following baseline hypothesis: CEOs ’experiences of a higher level of macro acquisition activity during their career transition led them to develop a more negative perception of acquisitions, which then persists in influencing their propensity to make acquisitions once becoming CEO. The analysis, based on a sample of CEOs and their firms’ acquisition activity, supports the baseline hypothesis and four moderation hypotheses (i.e., CEO life stage, CEO functional background, firm acquisitions, firm headquarters location).