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Does managerial ability drive frequent acquisitions? The role of strategic agency, firm innovativeness, and environmental uncertainty

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  • Mishra, Chandra S.

Abstract

The strategic agency hypothesis in emerging behavioral theory of the firm suggests that high ability managers have strategic foresight to search distant regions to sense and seize innovative opportunities. Conventional behavioral theory based suggests that managers conduct myopic searches to discover growth opportunities. We test the strategic agency hypothesis in that we investigate the association between strategic managerial ability and the firm's propensity for frequent acquisition using a sample of 5496 firm-year observations over the 2000–2016 period. We find that high strategic ability managers are more likely to pursue frequent acquisitions when the acquirer is innovative and operates in a risky environment. Our results are consistent with the strategic agency hypothesis in that managers with high strategic ability have sufficient strategic foresight to sense and seize growth opportunities via frequent acquisitions in a timely manner.

Suggested Citation

  • Mishra, Chandra S., 2023. "Does managerial ability drive frequent acquisitions? The role of strategic agency, firm innovativeness, and environmental uncertainty," International Review of Economics & Finance, Elsevier, vol. 88(C), pages 861-873.
    • Handle: RePEc:eee:reveco:v:88:y:2023:i:c:p:861-873
    DOI: 10.1016/j.iref.2023.07.026
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    References listed on IDEAS

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    1. Amor, Salma Ben & Kooli, Maher, 2016. "Do acquisitions affect IPO long-run performance? Evidence from single vs. multiple acquirers," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 40(C), pages 63-79.
    2. Marianne Bertrand & Antoinette Schoar, 2003. "Managing with Style: The Effect of Managers on Firm Policies," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 118(4), pages 1169-1208.
    3. Jeffrey M. Wooldridge, 2002. "Inverse probability weighted M-estimators for sample selection, attrition, and stratification," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 1(2), pages 117-139, August.
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    Cited by:

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