Speak Out Your Risk Dialectal Effects on Merger Decisions

35 Pages Posted: 19 Jul 2017 Last revised: 29 May 2018

See all articles by Yang Jiao

Yang Jiao

Fort Hays State University

Xi Rao

Chongqing University

Shijun Guo

University of Queensland - Business School

Yaseen Alhaj-Yaseen

University of Findlay

Date Written: February 21, 2018

Abstract

The “biological code” of a language can be measured by tone patterns and pitch heights, which are recognized to foster and promote certain personal traits like self-confidence and risk tolerance. Guided by linguistic and financial research, this study examines the impact of Chinese dialects on CEOs’ merger decisions. We hypothesize that CEOs in China who speak different dialects may have different tendencies to engage in risky activities, like mergers and acquisitions (M&As). Results suggest that CEOs who speak dialects with fewer rising tones and higher pitch are more likely to undertake M&As, while CEOs who speak dialects with more rising tones and lower pitch are less likely to undertake M&As. The results are robust to various specifications, including the impact of local economic and regional cultural factors. Additionally, firms’ performances after M&As are evaluated. The results suggest that CEOs’ overconfidence and high-risk tolerance are likely to cause M&As to be less successful in the long run.

Keywords: language; dialect; mergers and acquisitions; risk-taking behavior

JEL Classification: G31, G34, Z13

Suggested Citation

Jiao, Yang and Rao, Xi and Guo, Shijun and Alhaj-Yaseen, Yaseen, Speak Out Your Risk Dialectal Effects on Merger Decisions (February 21, 2018). Available at SSRN: https://ssrn.com/abstract=3002389 or http://dx.doi.org/10.2139/ssrn.3002389

Yang Jiao

Fort Hays State University ( email )

Hays, KS 67601
United States

Xi Rao (Contact Author)

Chongqing University ( email )

Shazheng Str 174, Shapingba District
Chongqing 400044, Chongqing 400030
China

Shijun Guo

University of Queensland - Business School ( email )

St Lucia
Brisbane, Queensland 4072
Australia

Yaseen Alhaj-Yaseen

University of Findlay ( email )

Hancock County, OH
United States

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