Browsing by Subject "Acquisitions"

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Balancing the equation : the joint effects of acquiring and target CEOs’ hubris on acquisition outcomes
(2023-04-24) Oladimeji, Temitope Stephen; Henderson, Andrew Duane; Harrison, David A; Graebner, Melissa E; Akinsanmi, Bukky I
Scholars have consistently identified CEO hubris as a significant factor in acquisitions because they influence deal likelihood and shareholder returns, for example. However, little attention has been devoted to target-CEO hubris as researchers have focused predominantly on acquiring CEOs. Research shows that target CEOs play important roles in acquisition outcomes. Given this, a more complete understanding of the role of executive hubris in acquisitions requires considering both acquiring and target sides. To address this, this dissertation investigates the joint effects of acquiring and target CEOs’ hubris in acquisitions. Using a sample of 422 acquisition deals between US-based public firms from 2010 to 2020, I find that, contrary to received wisdom, acquirer-CEO hubris has a positive association with acquisition deal completion only when target-CEO hubris is low. When target-CEO hubris is high, the relationship between acquirer-CEO hubris and acquisition deal completion becomes negative. Moreover, I find that, in acquisitions in which a target CEO remains, acquirer-CEO hubris is less likely to have a negative association with shareholder returns when target-CEO hubris is high. These findings have important implications for research on hubris and acquisitions and related areas. I discuss these and offer suggestions for new theoretical and empirical directions.
How does the subsequent accounting for goodwill affect managers' acquisition decisions?
(2022-04-29) Mongold, Cassie; White, Brian, 1973-; Harrison, David; Hales, Jeffrey; Koonce, Lisa; McInnis, John
Accounting standard setters are considering abandoning the impairment testing model for goodwill and returning to an amortization-based standard. Proponents of impairment testing argue that the threat of future impairments causes managers to feel more accountable for their acquisitions, which in turn can lead to better acquisition decisions. I perform an experiment to test whether the subsequent accounting for goodwill impacts managers’ felt accountability and acquisition decisions. I find that an impairment testing regime increases managers’ feelings of accountability, but can also cause managers to pursue acquisitions with lower expected returns. Interestingly, I find that managers subject to amortization plus impairment testing (i.e., a “hybrid” method) feel as accountable as those subject to impairment testing only, but are less likely to choose acquisitions with lower expected returns. My findings support the notion that an impairment testing model makes managers feel more accountable, but highlights the potential unintended consequences of an impairment testing regime.