Behavioral consistency in SEOs and M&As: Evidence from CEO anchoring heuristic
65 Pages Posted: 28 Sep 2016 Last revised: 29 Jan 2020
Date Written: January 28, 2020
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: Suggested Citation