The Acquisitive Nature of Extraverted CEOs

Forthcoming, Administrative Science Quarterly, DOI: 10.1177/0001839217712240

Posted: 24 May 2017 Last revised: 31 May 2017

See all articles by Shavin Malhotra

Shavin Malhotra

University of Waterloo

Taco Reus

Erasmus University Rotterdam (EUR)

PengCheng Zhu

University of San Diego

Erik Roelofsen

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM)

Date Written: May 24, 2017

Abstract

This study examines how extraversion, a personality trait that signifies more or less positive affect, assertive behavior, decisive thinking, and desires for social engagement, influences chief executive officers' (CEOs') decisions and the ensuing strategic behavior of firms. Using a novel linguistic technique to assess personality from unscripted text spoken by 2,381 CEOs of S&P 1500 firms over ten years, we show that CEOs' extraversion influences the merger and acquisition (M&A) behavior of firms above and beyond other well-established personality traits. We find that extraverted CEOs are more likely to engage in acquisitions, and to conduct larger ones, than other CEOs and that these effects are partially explained by their higher representation on boards of other firms. Moreover, we find that the acquisitive nature of extraverted CEOs reveals itself particularly in so-called "weaker" situations, in which CEOs enjoy considerable discretion to behave in ways akin to their personality traits. Subsequent analyses show that extraverted CEOs are also more likely than other CEOs to succeed in M&As, as reflected by stronger abnormal returns following acquisition announcements.

Keywords: personality, chief executive officers, mergers and acquisitions, extraversion

JEL Classification: G02, G34, M12

Suggested Citation

Malhotra, Shavin and Reus, Taco and Zhu, Phil and Roelofsen, Erik, The Acquisitive Nature of Extraverted CEOs (May 24, 2017). Forthcoming, Administrative Science Quarterly, DOI: 10.1177/0001839217712240. Available at SSRN: https://ssrn.com/abstract=2973018

Shavin Malhotra

University of Waterloo ( email )

200 University Ave W
Waterloo, Ontario N2L 3G1
Canada

Taco Reus

Erasmus University Rotterdam (EUR) ( email )

Burgemeester Oudlaan 50
3000 DR Rotterdam, Zuid-Holland 3062PA
Netherlands

Phil Zhu (Contact Author)

University of San Diego ( email )

5998 Alcala Park
San Diego, CA 92110
United States

Erik Roelofsen

Erasmus University Rotterdam (EUR) - Rotterdam School of Management (RSM) ( email )

P.O. Box 1738
Room T08-21
3000 DR Rotterdam, 3000 DR
Netherlands

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