Behavioral consistency in SEOs and M&As: Evidence from CEO anchoring heuristic

65 Pages Posted: 28 Sep 2016 Last revised: 29 Jan 2020

See all articles by Fengfei Li

Fengfei Li

Deakin University - Faculty of Business and Law

Chen Lin

The University of Hong Kong - Faculty of Business and Economics

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics

Date Written: January 28, 2020

Abstract

We examine whether CEOs carry anchoring heuristic in personal decision-making over to corporate decisions. We first show that CEOs tend to anchor on the 52-week high stock price for insider selling and then identify the “anchoring CEOs.” Firms with anchoring CEOs are more likely to issue seasoned equity offerings when stock prices approach the 52-week high. Moreover, for mergers and acquisitions deals by anchoring bidder CEOs, offer premium increases more with the target’s 52-week high stock price. The results are more pronounced for situations with higher valuation uncertainty. Overall, anchoring CEOs behave consistently across personal and professional situations.

Keywords: anchoring CEO; seasoned equity offerings; mergers; acquisitions; 52-week high; insider trading

JEL Classification: G14; G32; G34

Suggested Citation

Li, Fengfei and Lin, Chen and Lin, Tse-Chun, Behavioral consistency in SEOs and M&As: Evidence from CEO anchoring heuristic (January 28, 2020). Available at SSRN: https://ssrn.com/abstract=2844600 or http://dx.doi.org/10.2139/ssrn.2844600

Fengfei Li (Contact Author)

Deakin University - Faculty of Business and Law ( email )

Burwood, Victoria 3215
Australia

Chen Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Tse-Chun Lin

The University of Hong Kong - Faculty of Business and Economics ( email )

Pokfulam Road
Hong Kong
China

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
36
Abstract Views
236
PlumX Metrics