Generalist versus specialist CEOs and acquisitions: Two‐sided matching and the impact of CEO characteristics on firm outcomes

Abstract

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 All authors contributed equally and are listed in alphabetical order of their surnames.

Chief Executive Officer Proactive Personality and Acquisitions: A Fuzzy Set Qualitative Comparative Analysis of China's Listed Firms

“…Therefore, CEOs' decisions are consistent with their judgment and competencies. Industry experts can excel at the integration of industries (Chen et al, 2021 ).…”

“…To improve the quality of decision-making, the company should pay attention to the characteristics and changes of managers' personality traits in strategy formulation. When making M&A decisions, CEOs must also consider their own competencies, background, and knowledge, judging whether they comprehend the target industry's characteristics and operations (Wally and Baum, 1994 ; Chen et al, 2021 ). Managers must attempt successful acquisitions that will positively affect the corporation and reduce the possibility of acquisition failure.…”

“…Additionally, Shi et al ( 2019 ) verified that in the presence of high CEO-CFO language style matching, firms tended to undertake more mergers and acquisitions. Chen et al ( 2021 ) found that the fit between CEO human capital makeup and their type of acquisitions relates to stronger performance. Moreover, studies exist on the educational background (Wang and Yin, 2018 ), social status (Plaksina et al, 2019 ), executive migration (Wang, 2019 ), supply chain industry experience (Burns et al, 2021 ), and multiple merger experience (Jeganathan et al, 2021 ).…”

“…Other studies believe that relevant experience of the target industry will promote the evaluation of the target company in the diversified M&As (Wang et al, 2015 ). CEOs with a broader set of knowledge and skills are more likely to engage in unrelated acquisitions (Chen et al, 2021 ).…”

Organizational Psychological Capital in Family Firms: the Role of Family Firm Heterogeneity

“…Additionally, observational secondary data offer limited potential to arrive at causal inferences; future work might incorporate research designs that allow causal patterns such as two-sided matching models (Chen et al. 2020 ). Our sample period ends in 2013—but particularly subdimensions of organizational psychological capital (i.e., resilience and optimism) have recently seen a surge in public attention due to the impact of the COVID-19 pandemic on firms.…”