The Cultural Origin of CEOs’ Attitudes Towards Uncertainty: Evidence from Corporate Acquisitions
Review of Financial Studies, Forthcoming
82 Pages Posted: 16 Jun 2017 Last revised: 28 Sep 2019
Date Written: May 2019
We examine the role of cultural heritage in shaping U.S. CEOs’ attitudes toward uncertainty, in the context of their corporate acquisition decisions. We find that CEOs with a more uncertainty-avoiding cultural heritage are less likely to engage in acquisitions. Conditional on making an acquisition, uncertainty-averse CEOs prefer targets in familiar industries and targets that can be more easily integrated. The emphasis on cultural identity by CEOs’ parents and the ethnic composition of CEOs’ early life environment significantly influence the cultural transmission process. Cultural differences about uncertainty attitudes persist over multiple generations, but become less pronounced over time.
Keywords: culture, cultural heritage, uncertainty avoidance, uncertainty aversion, Hofstede, CEO, corporate acquisition, social transmission of preference
JEL Classification: G34, G4, G40, G41
Suggested Citation: Suggested Citation