Publication Type

Journal Article

Version

acceptedVersion

Publication Date

6-2021

Abstract

Research Summary: To address endogeneity concerns stemming from firm-CEO matching, we deploy a two-sided matching model that identifies the complementarities arising from the CEO-firm match and subsequently account for these complementarities in empirical tests. Applying this approach, we examine how the nature of CEOs' human capital affects the acquisition behavior and performance of firms. We find that generalist CEOs (CEOs with a broader set of knowledge and skills) are more likely to engage in unrelated acquisitions than specialist CEOs (CEOs with a narrower but deeper set of knowledge and skills). We also find that the fit between the nature of CEOs' human capital and the type of acquisitions they undertake is associated with stronger performance. Our paper contributes to research on CEOs, human capital, M&As, and microfoundations.

Managerial Summary: We deploy an empirical approach that takes into account the complementarities that arise from the matching of CEOs and firms when testing hypotheses on how CEO attributes shape firm outcomes. Based on this approach, our study finds that CEOs with a broader set of managerial knowledge and skills (generalist CEOs) are more likely to engage in unrelated acquisitions (acquisitions outside a firm's main industry) than CEOs with a narrower but deeper set of knowledge and skills that is more closely tied to a particular industry, firm, or domain (specialist CEOs). We also find that the fit between the nature of CEOs' human capital and the type of acquisitions they engage in is associated with stronger performance.

Keywords

acquisitions, CEOs, human capital, microfoundations, two-sided matching

Discipline

Accounting | Human Resources Management | Strategic Management Policy

Research Areas

Corporate Reporting and Disclosure

Publication

Strategic Management Journal

Volume

42

Issue

6

First Page

1184

Last Page

1214

ISSN

0143-2095

Identifier

10.1002/smj.3258

Publisher

Wiley

Embargo Period

5-19-2021

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1002/smj.3258

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