Cultural Values, CEO Risk Aversion and Corporate Takeovers

37 Pages Posted: 12 Oct 2011

See all articles by Thorsten Lehnert

Thorsten Lehnert

University of Luxembourg

Bart Frijns

Open University of the Netherlands; Auckland University of Technology - Faculty of Business & Law

Aaron B. Gilbert

Auckland University of Technology - Faculty of Business & Law

Alireza Tourani-Rad

Auckland University of Technology - Faculty of Business & Law

Date Written: October 12, 2011

Abstract

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

JEL Classification: D81, G34, M14

Suggested Citation

Lehnert, Thorsten and Frijns, Bart and Gilbert, Aaron B. and Tourani-Rad, Alireza, Cultural Values, CEO Risk Aversion and Corporate Takeovers (October 12, 2011). Paris December 2011 Finance Meeting EUROFIDAI - AFFI. Available at SSRN: https://ssrn.com/abstract=1942971 or http://dx.doi.org/10.2139/ssrn.1942971

Thorsten Lehnert (Contact Author)

University of Luxembourg ( email )

6, rue Coudenhove-Kalergi
Luxembourg, L-1359
Luxembourg

Bart Frijns

Open University of the Netherlands ( email )

P.O. Box 2960
Heerlen 6401DL
Netherlands

Auckland University of Technology - Faculty of Business & Law ( email )

3 Wakefield Street
Private Bag 92006
Auckland Central 1020
New Zealand

Aaron B. Gilbert

Auckland University of Technology - Faculty of Business & Law ( email )

3 Wakefield Street
Private Bag 92006
Auckland Central 1020
New Zealand

Alireza Tourani-Rad

Auckland University of Technology - Faculty of Business & Law ( email )

3 Wakefield Street
Private Bag 92006
Auckland Central 1020
New Zealand

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