Generalist vs. Specialist CEOs and Acquisitions: Two-sided Matching and the Impact of CEO Characteristics on Firm Outcomes

48 Pages Posted: 2 Dec 2020

See all articles by Guoli Chen

Guoli Chen

INSEAD - Singapore

Sterling Huang

Singapore Management University - School of Accountancy

Philipp Meyer-Doyle

INSEAD - Strategy

Denisa Mindruta

HEC Paris - Strategy & Business Policy

Date Written: November 29, 2020

Abstract

Research Summary: To address endogeneity concerns stemming from firm-CEO matching, we deploy a two-sided matching model that identifies the complementarities arising from the CEO-firm match and subsequently account for these complementarities in empirical tests. Applying this approach, we examine how the nature of CEOs’ human capital affects the acquisition behavior and performance of firms. We find that generalist CEOs (CEOs with a broader set of knowledge and skills) are more likely to engage in unrelated acquisitions than specialist CEOs (CEOs with a narrower but deeper set of knowledge and skills). We also find that the fit between the nature of CEOs’ human capital and the type of acquisitions they undertake is associated with stronger performance. Our paper contributes to research on CEOs, human capital, M&As, and microfoundations.

Managerial Summary: We deploy an empirical approach that takes into account the complementarities that arise from the matching of CEOs and firms when testing hypotheses on how CEO attributes shape firm outcomes. Based on this approach, our study finds that CEOs with a broader set of managerial knowledge and skills (generalist CEOs) are more likely to engage in unrelated acquisitions (acquisitions outside a firm’s main industry) than CEOs with a narrower but deeper set of knowledge and skills that is more closely tied to a particular industry, firm, or domain (specialist CEOs). We also find that the fit between the nature of CEOs’ human capital and the type of acquisitions they engage in is associated with stronger performance.

Keywords: Two-sided matching; human capital; CEOs; acquisitions; microfoundations

Suggested Citation

Chen, Guoli and Huang, Sterling and Meyer-Doyle, Philipp and Mindruta, Denisa, Generalist vs. Specialist CEOs and Acquisitions: Two-sided Matching and the Impact of CEO Characteristics on Firm Outcomes (November 29, 2020). HEC Paris Research Paper No. SPE-2020-1407, Singapore Management University School of Accountancy Research Paper No. 2021-131, Available at SSRN: https://ssrn.com/abstract=3740478 or http://dx.doi.org/10.2139/ssrn.3740478

Guoli Chen

INSEAD - Singapore ( email )

Singapore

Sterling Huang

Singapore Management University - School of Accountancy ( email )

60 Stamford Road
Singapore 178900
Singapore
6808 7929 (Phone)

Philipp Meyer-Doyle (Contact Author)

INSEAD - Strategy ( email )

1 Ayer Rajah Avenue
Singapore, 138676
Singapore

Denisa Mindruta

HEC Paris - Strategy & Business Policy ( email )

Jouy-en-Josas Cedex, 78351
France

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
137
Abstract Views
1,256
rank
286,885
PlumX Metrics