CEO Home Bias and Corporate Acquisitions
58 Pages Posted: 17 Jun 2016 Last revised: 18 Feb 2018
Date Written: January 24, 2018
CEOs are significantly more likely to purchase targets near their birth place, reflecting either beneficial informational advantages or inefficient managerial objectives. Evidence from bidder announcement returns supports the latter view. Acquirer returns are significantly lower for CEO home bias acquisitions, and the negative announcement effect is stronger when the target is located further away, among poorly-governed firms, and when the CEO has a deeper birth place connection. Home bias CEOs are more likely to purchase stock following merger announcements, which supports a familiarity bias interpretation over agency concerns. Our findings suggest that CEO home bias influences firm investment.
Keywords: Mergers and Acquisitions, Home Bias
JEL Classification: G14, G34
Suggested Citation: Suggested Citation