IDEAS home Printed from https://ideas.repec.org/a/bla/stratm/v42y2021i6p1184-1214.html
   My bibliography  Save this article

Generalist versus specialist CEOs and acquisitions: Two‐sided matching and the impact of CEO characteristics on firm outcomes

Author

Listed:
  • Guoli Chen
  • Sterling Huang
  • Philipp Meyer‐Doyle
  • Denisa Mindruta

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.

Suggested Citation

  • Guoli Chen & Sterling Huang & Philipp Meyer‐Doyle & Denisa Mindruta, 2021. "Generalist versus specialist CEOs and acquisitions: Two‐sided matching and the impact of CEO characteristics on firm outcomes," Strategic Management Journal, Wiley Blackwell, vol. 42(6), pages 1184-1214, June.
    • Handle: RePEc:bla:stratm:v:42:y:2021:i:6:p:1184-1214
    DOI: 10.1002/smj.3258
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/smj.3258
    Download Restriction: no
    File URL: https://libkey.io/10.1002/smj.3258?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Maurizio Zollo & Harbir Singh, 2004. "Deliberate learning in corporate acquisitions: post‐acquisition strategies and integration capability in U.S. bank mergers," Strategic Management Journal, Wiley Blackwell, vol. 25(13), pages 1233-1256, December.
    2. Xavier Gabaix & Augustin Landier, 2008. "Why has CEO Pay Increased So Much?," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 123(1), pages 49-100.
    3. Oktay Akkus & J. Anthony Cookson & Ali Hortaçsu, 2016. "The Determinants of Bank Mergers: A Revealed Preference Analysis," Management Science, INFORMS, vol. 62(8), pages 2241-2258, August.
    4. Abhirup Chakrabarti & Will Mitchell, 2016. "The role of geographic distance in completing related acquisitions: Evidence from U.S. chemical manufacturers," Strategic Management Journal, Wiley Blackwell, vol. 37(4), pages 673-694, April.
    5. Marko Tervio, 2008. "The Difference That CEOs Make: An Assignment Model Approach," American Economic Review, American Economic Association, vol. 98(3), pages 642-668, June.
    6. Vincent L. Barker , III & George C. Mueller, 2002. "CEO Characteristics and Firm R&D Spending," Management Science, INFORMS, vol. 48(6), pages 782-801, June.
    7. Olivier Chatain & Philipp Meyer-Doyle, 2017. "Alleviating managerial dilemmas in human-capital-intensive firms through incentives: Evidence from M&A legal advisors," Strategic Management Journal, Wiley Blackwell, vol. 38(2), pages 232-254, February.
    8. Cláudia Custódio & Miguel A. Ferreira & Pedro Matos, 2019. "Do General Managerial Skills Spur Innovation?," Management Science, INFORMS, vol. 65(2), pages 459-476, February.
    9. Elie Matta & Paul W. Beamish, 2008. "The accentuated CEO career horizon problem: evidence from international acquisitions," Post-Print hal-00486653, HAL.
    10. Russell W. Coff, 1999. "How Buyers Cope with Uncertainty when Acquiring Firms in Knowledge-Intensive Industries: Caveat Emptor," Organization Science, INFORMS, vol. 10(2), pages 144-161, April.
    11. Jeremy T. Fox, 2018. "Estimating matching games with transfers," Quantitative Economics, Econometric Society, vol. 9(1), pages 1-38, March.
    12. G.M. Constantinides & M. Harris & R. M. Stulz (ed.), 2013. "Handbook of the Economics of Finance," Handbook of the Economics of Finance, Elsevier, volume 2, number 2-b, March.
    13. G.M. Constantinides & M. Harris & R. M. Stulz (ed.), 2013. "Handbook of the Economics of Finance," Handbook of the Economics of Finance, Elsevier, volume 2, number 2-a, March.
    14. Wei Shi & Robert E. Hoskisson & Yan Anthea Zhang, 2017. "Independent director death and CEO acquisitiveness: Build an empire or pursue a quiet life?," Strategic Management Journal, Wiley Blackwell, vol. 38(3), pages 780-792, March.
    15. Custódio, Cláudia & Ferreira, Miguel A. & Matos, Pedro, 2013. "Generalists versus specialists: Lifetime work experience and chief executive officer pay," Journal of Financial Economics, Elsevier, vol. 108(2), pages 471-492.
    16. Jeremy T. Fox, 2010. "Identification in matching games," Quantitative Economics, Econometric Society, vol. 1(2), pages 203-254, November.
    17. Denisa Mindruta, 2013. "Value creation in university-firm research collaborations: A matching approach," Post-Print hal-00818682, HAL.
    18. Kyle J. Mayer & Deepak Somaya & Ian O. Williamson, 2012. "Firm-Specific, Industry-Specific, and Occupational Human Capital and the Sourcing of Knowledge Work," Organization Science, INFORMS, vol. 23(5), pages 1311-1329, October.
    19. Guoli Chen & Craig Crossland & Sterling Huang, 2020. "That Could Have Been Me: Director Deaths, CEO Mortality Salience, and Corporate Prosocial Behavior," Management Science, INFORMS, vol. 66(7), pages 3142-3161, July.
    20. Elie Matta & Paul W. Beamish, 2008. "The accentuated CEO career horizon problem: evidence from international acquisitions," Strategic Management Journal, Wiley Blackwell, vol. 29(7), pages 683-700, July.
    21. Harbir Singh & Cynthia A. Montgomery, 1987. "Corporate acquisition strategies and economic performance," Strategic Management Journal, Wiley Blackwell, vol. 8(4), pages 377-386, July.
    22. Belenzon, Sharon & Schankerman, Mark, 2015. "Motivation and sorting of human capital in open innovation," LSE Research Online Documents on Economics 58514, London School of Economics and Political Science, LSE Library.
    23. Nile W. Hatch & Jeffrey H. Dyer, 2004. "Human capital and learning as a source of sustainable competitive advantage," Strategic Management Journal, Wiley Blackwell, vol. 25(12), pages 1155-1178, December.
    24. Sarah E. Wolfolds & Jordan Siegel, 2019. "Misaccounting for endogeneity: The peril of relying on the Heckman two‐step method without a valid instrument," Strategic Management Journal, Wiley Blackwell, vol. 40(3), pages 432-462, March.
    25. Jeremy T. Fox & Chenyu Yang & David H. Hsu, 2018. "Unobserved Heterogeneity in Matching Games," Journal of Political Economy, University of Chicago Press, vol. 126(4), pages 1339-1373.
    26. Guoli Chen & Donald C. Hambrick, 2012. "CEO Replacement in Turnaround Situations: Executive (Mis)Fit and Its Performance Implications," Organization Science, INFORMS, vol. 23(1), pages 225-243, February.
    27. Fama, Eugene F. & French, Kenneth R., 1997. "Industry costs of equity," Journal of Financial Economics, Elsevier, vol. 43(2), pages 153-193, February.
    28. Brian L. Connelly & Wei Shi & Jinyong Zyung, 2017. "Managerial response to constitutional constraints on shareholder power," Strategic Management Journal, Wiley Blackwell, vol. 38(7), pages 1499-1517, July.
    29. Antoinette Schoar & Luo Zuo, 2017. "Shaped by Booms and Busts: How the Economy Impacts CEO Careers and Management Styles," The Review of Financial Studies, Society for Financial Studies, vol. 30(5), pages 1425-1456.
    30. Becker, Gary S, 1973. "A Theory of Marriage: Part I," Journal of Political Economy, University of Chicago Press, vol. 81(4), pages 813-846, July-Aug..
    31. Yihui Pan, 2017. "The Determinants and Impact of Executive-Firm Matches," Management Science, INFORMS, vol. 63(1), pages 185-200, January.
    32. Ronald W. Masulis & Cong Wang & Fei Xie, 2007. "Corporate Governance and Acquirer Returns," Journal of Finance, American Finance Association, vol. 62(4), pages 1851-1889, August.
    33. Cláudia Custódio & Daniel Metzger, 2013. "How Do CEOs Matter? The Effect of Industry Expertise on Acquisition Returns," The Review of Financial Studies, Society for Financial Studies, vol. 26(8), pages 2008-2047.
    34. Milgrom, Paul & Roberts, John, 1995. "Complementarities and fit strategy, structure, and organizational change in manufacturing," Journal of Accounting and Economics, Elsevier, vol. 19(2-3), pages 179-208, April.
    35. Philipp Meyer‐Doyle & Sunkee Lee & Constance E. Helfat, 2019. "Disentangling the microfoundations of acquisition behavior and performance," Strategic Management Journal, Wiley Blackwell, vol. 40(11), pages 1733-1756, November.
    36. Sharon Belenzon & Mark Schankerman, 2015. "Motivation and sorting of human capital in open innovation," Strategic Management Journal, Wiley Blackwell, vol. 36(6), pages 795-820, June.
    37. Denisa Mindruta, 2013. "Value creation in university-firm research collaborations: A matching approach," Strategic Management Journal, Wiley Blackwell, vol. 34(6), pages 644-665, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Hossain, Ashrafee & Masum, Abdullah-Al & Saadi, Samir & Benkraiem, Ramzi, 2023. "Generalist CEO and carbon emissions," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 68-86.
    2. Alderman, Jillian & Forsyth, Joetta & Griffy-Brown, Charla & Walton, Richard C., 2022. "The benefits of hiring a STEM CEO: Decision making under innovation and real options," Technology in Society, Elsevier, vol. 71(C).
    3. Wei, Liyuan & Yang, Yupin, 2022. "An empirical investigation of director selection in movie preproduction: A two-sided matching approach," International Journal of Research in Marketing, Elsevier, vol. 39(3), pages 888-906.
    4. Mei Cai & Suqiong Hu & Ya Wang & Jingmei Xiao, 2022. "A Dynamic Social Network Matching Model for Virtual Power Plants and Distributed Energy Resources with Probabilistic Linguistic Information," Sustainability, MDPI, vol. 14(22), pages 1-33, November.
    5. Kallias, Antonios & Kallias, Konstantinos & Tsalkamas, Ioannis & Zhang, Song, 2023. "One size does not fit all: The conditional role of CEO education on IPO performance," Journal of Business Research, Elsevier, vol. 157(C).
    6. Baghdadi, Ghasan A. & Safiullah, Md & Heyden, Mariano L.M., 2023. "Do gender diverse boards enhance managerial ability?," Journal of Corporate Finance, Elsevier, vol. 79(C).
    7. Kim, Yeongsu Anthony & Liang, Feng Helen, 2023. "The effect of CEO prominence on cross-border acquisitions: An international entrepreneurship approach," Journal of Business Research, Elsevier, vol. 163(C).
    8. Lin Jiang & Biyun Chen, 2023. "A Two-Stage Bilateral Matching Study of Teams-Technology Talents in New R&D Institutions Based on Prospect Theory," Sustainability, MDPI, vol. 15(4), pages 1-27, February.
    9. Biru, Ashenafi & Filatotchev, Igor & Bruton, Garry & Gilbert, David, 2023. "CEOs’ regulatory focus and firm internationalization: The moderating effects of CEO overconfidence, narcissism and career horizon," International Business Review, Elsevier, vol. 32(3).
    10. Vera Rocha & Luca Grilli, 2024. "Early-stage start-up hiring: the interplay between start-ups’ initial resources and innovation orientation," Small Business Economics, Springer, vol. 62(4), pages 1641-1668, April.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Ashish Arora & Michelle Gittelman & Sarah Kaplan & John Lynch & Will Mitchell & Nicolaj Siggelkow & Denisa Mindruta & Mahka Moeen & Rajshree Agarwal, 2016. "A two-sided matching approach for partner selection and assessing complementarities in partners' attributes in inter-firm alliances," Strategic Management Journal, Wiley Blackwell, vol. 37(1), pages 206-231, January.
    2. Wang, Lu & Su, Zhong-qin & Fung, Hung-Gay & Jin, Hong-min & Xiao, Zuoping, 2021. "Do CEOs with academic experience add value to firms? Evidence on bank loans from Chinese firms," Pacific-Basin Finance Journal, Elsevier, vol. 67(C).
    3. Arnaud Dupuy & Alfred Galichon, 2014. "Personality Traits and the Marriage Market," Journal of Political Economy, University of Chicago Press, vol. 122(6), pages 1271-1319.
    4. Delis, Manthos D. & Iosifidi, Maria & Kazakis, Pantelis & Ongena, Steven & Tsionas, Mike G., 2022. "Management practices and M&A success," Journal of Banking & Finance, Elsevier, vol. 134(C).
    5. Nikhil Agarwal & Eric Budish, 2021. "Market Design," NBER Working Papers 29367, National Bureau of Economic Research, Inc.
    6. Olivier Chatain & Denisa Mindruta, 2017. "Estimating Value Creation from Revealed Preferences: Application to Value-based Strategies," Strategic Management Journal, Wiley Blackwell, vol. 38(10), pages 1964-1985, October.
    7. Jean McGuire & Jana Oehmichen & Michael Wolff & Roman Hilgers, 2019. "Do Contracts Make Them Care? The Impact of CEO Compensation Design on Corporate Social Performance," Journal of Business Ethics, Springer, vol. 157(2), pages 375-390, June.
    8. Delis, Manthos D & Iosifidi, Maria & Kazakis, Pantelis, 2017. "Management as the sine qua non for M&A success," MPRA Paper 81283, University Library of Munich, Germany.
    9. Keloharju, Matti & Knüpfer, Samuli & Tåg, Joacim, 2020. "CEO Health," Working Paper Series 1326, Research Institute of Industrial Economics, revised 30 May 2022.
    10. Adams, Renée & Keloharju, Matti & Knüpfer, Samuli, 2018. "Are CEOs born leaders? Lessons from traits of a million individuals," Journal of Financial Economics, Elsevier, vol. 130(2), pages 392-408.
    11. Dev R. Mishra, 2021. "Charitable inclination and the chief executive officer's pay package," The Financial Review, Eastern Finance Association, vol. 56(1), pages 85-108, February.
    12. Albert Banal-Estañol & Inés Macho-Stadler & David Pérez-Castrillo, 2018. "Endogenous Matching in University-Industry Collaboration: Theory and Empirical Evidence from the United Kingdom," Management Science, INFORMS, vol. 64(4), pages 1591-1608, April.
    13. Yihui Pan, 2017. "The Determinants and Impact of Executive-Firm Matches," Management Science, INFORMS, vol. 63(1), pages 185-200, January.
    14. King, Timothy & Srivastav, Abhishek & Williams, Jonathan, 2016. "What's in an education? Implications of CEO education for bank performance," Journal of Corporate Finance, Elsevier, vol. 37(C), pages 287-308.
    15. Stephen Hansen & Tejas Ramdas & Raffaella Sadun & Joseph Fuller, 2021. "The Demand for Executive Skills," CESifo Working Paper Series 9152, CESifo.
    16. Betzer, André & Ibel, Maximilian & Lee, Hye Seung & Limbach, Peter & Salas, Jesus M., 2016. "Are generalists beneficial to corporate shareholders? Evidence from sudden deaths," CFR Working Papers 16-12, University of Cologne, Centre for Financial Research (CFR).
    17. Dyaran Bansraj & Han Smit & Vadym Volosovych, 2020. "Can Private Equity Funds Act as Strategic Buyers? Evidence from Buy-and-Build Strategies," Tinbergen Institute Discussion Papers 20-041/IV, Tinbergen Institute.
    18. Baghdadi, Ghasan A. & Safiullah, Md & Heyden, Mariano L.M., 2023. "Do gender diverse boards enhance managerial ability?," Journal of Corporate Finance, Elsevier, vol. 79(C).
    19. Alfred Galichon & Bernard Salani'e, 2021. "Cupid's Invisible Hand: Social Surplus and Identification in Matching Models," Papers 2106.02371, arXiv.org, revised Jan 2023.
    20. Wang, Wenyu & Wu, Yufeng, 2020. "Managerial control benefits and takeover market efficiency," Journal of Financial Economics, Elsevier, vol. 136(3), pages 857-878.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:stratm:v:42:y:2021:i:6:p:1184-1214. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://onlinelibrary.wiley.com/journal/10.1111/0143-2095 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.