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The Cultural Origin of CEOs’ Attitudes Towards Uncertainty: Evidence from Corporate Acquisitions

62 Pages Posted: 16 Jun 2017 Last revised: 10 Sep 2017

Yihui Pan

University of Utah - Department of Finance

Stephan Siegel

University of Washington - Michael G. Foster School of Business

Tracy Yue Wang

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: September 8, 2017

Abstract

We examine how U.S. CEOs’ attitudes towards uncertainty as well as their corporate investment decisions, in particular acquisitions, are shaped by their cultural heritage – a potentially important aspect of their upbringing and early life environment. We find that CEOs with a more uncertainty avoiding cultural heritage are less likely to engage in corporate acquisitions. Conditional on making an acquisition, more uncertainty avoiding CEOs prefer targets in industries that they are familiar with and targets that can be integrated more easily. The impact of culturally transmitted uncertainty attitudes on M&A decisions is stronger when CEOs’ parents put more emphasis on the family’s cultural heritage. Finally, cultural differences with respect to uncertainty attitudes persist over multiple generations, but become less pronounced over time. Overall, our results highlight an important role of cultural heritage in shaping decisions under uncertainty by U.S. CEOs as well as of parents in transmitting cultural values, in particular attitudes towards uncertainty, to their children.

Keywords: culture, cultural heritage, uncertainty avoidance, uncertainty aversion, Hofstede, CEO, corporate acquisition, social transmission of preference

Suggested Citation

Pan, Yihui and Siegel, Stephan and Wang, Tracy Yue, The Cultural Origin of CEOs’ Attitudes Towards Uncertainty: Evidence from Corporate Acquisitions (September 8, 2017). Available at SSRN: https://ssrn.com/abstract=2987623

Yihui Pan

University of Utah - Department of Finance ( email )

David Eccles School of Business
Salt Lake City, UT 84112
United States

Stephan Siegel (Contact Author)

University of Washington - Michael G. Foster School of Business ( email )

Box 353200
Seattle, WA 98195-3200
United States

HOME PAGE: http://faculty.washington.edu/ss1110/

Tracy Yue Wang

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

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