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Speak out your risk: Dialectal effects on merger decisions

Author

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  • Jiao, Yang
  • Rao, Xi
  • Guo, Shijun
  • Alhaj-Yaseen, Yaseen S.

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.

Suggested Citation

  • Jiao, Yang & Rao, Xi & Guo, Shijun & Alhaj-Yaseen, Yaseen S., 2018. "Speak out your risk: Dialectal effects on merger decisions," Pacific-Basin Finance Journal, Elsevier, vol. 49(C), pages 200-212.
    • Handle: RePEc:eee:pacfin:v:49:y:2018:i:c:p:200-212
    DOI: 10.1016/j.pacfin.2018.04.007
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    Cited by:

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    2. Fang, Tian Jin & Han, Jianlei & He, Jing & Shi, Jing, 2021. "Property rights protection and mergers and acquisitions," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).
    3. Evans Opoku‐Mensah & Yuming Yin, 2023. "Controlling shareholders' influence on acquisition decisions and value creation: An empirical study from China," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1965-1980, April.
    4. Hu, Huiting & Yu, Gangning & Xiong, Xueli & Guo, Lijia & Huang, Jiashun, 2022. "Cultural Diversity and Innovation: An Empirical Study from Dialect," Technology in Society, Elsevier, vol. 69(C).
    5. Faff, Robert & Prasadh, Shyaam & Shams, Syed, 2019. "Merger and acquisition research in the Asia-Pacific region: A review of the evidence and future directions," Research in International Business and Finance, Elsevier, vol. 50(C), pages 267-278.
    6. Jiang, Jiaoliang & Chen, Yulin, 2021. "How does labor protection influence corporate risk-taking? Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 68(C).

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    More about this item

    Keywords

    Language; Dialect; Mergers and acquisitions; Risk-taking behavior;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • Z13 - Other Special Topics - - Cultural Economics - - - Economic Sociology; Economic Anthropology; Language; Social and Economic Stratification

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