CEO Home Bias and Corporate Acquisitions

58 Pages Posted: 17 Jun 2016 Last revised: 18 Feb 2018

See all articles by Kiseo Chung

Kiseo Chung

Texas Tech University - Area of Finance; Emory University, Goizueta Business School

T. Clifton Green

Emory University - Department of Finance

Breno Schmidt

Emory University - Goizueta Business School

Date Written: January 24, 2018

Abstract

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

Chung, Kiseo and Green, T. Clifton and Schmidt, Breno, CEO Home Bias and Corporate Acquisitions (January 24, 2018). Available at SSRN: https://ssrn.com/abstract=2796264 or http://dx.doi.org/10.2139/ssrn.2796264

Kiseo Chung

Texas Tech University - Area of Finance ( email )

Lubbock, TX 79409
United States

Emory University, Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

T. Clifton Green (Contact Author)

Emory University - Department of Finance ( email )

1300 Clifton Rd.
Atlanta, GA 30322-2710
United States
404-727-5167 (Phone)
404-727-5238 (Fax)

Breno Schmidt

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

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