IDEAS home Printed from https://ideas.repec.org/a/kap/asiapa/v40y2023i2d10.1007_s10490-021-09796-4.html
   My bibliography  Save this article

CEO age and entry timing within industry merger waves: Evidence from China

Author

Listed:
  • Xi Zhao

    (Tianjin University)

  • Meiling Tang

    (Tianjin University)

Abstract

A firm’s entry timing within merger waves matters, as early movers outperform later ones. However, the managerial characteristics that facilitate early or late participation in merger waves remain unknown. We draw on the cognitive filtering mechanisms to investigate how CEO age influences entry timing within industry merger waves. Our findings suggest that CEO youth is associated with early action in merger waves: a firm with a CEO who is 10 years younger is 16.53% more likely to become an early mover in merger waves. The age effect cannot be attributed to the selection of younger CEOs by high-risk firms, nor to other age-related CEO characteristics. Younger CEOs also prefer to complete acquisitions faster by using all-cash payments to maintain early-mover advantages. By acting earlier and faster in merger waves, younger CEOs are found to significantly improve acquisition performance and produce strategic synergy. This paper underscores the importance of CEOs’ personal characteristics for corporate strategic decisions in merger waves.

Suggested Citation

  • Xi Zhao & Meiling Tang, 2023. "CEO age and entry timing within industry merger waves: Evidence from China," Asia Pacific Journal of Management, Springer, vol. 40(2), pages 517-552, June.
    • Handle: RePEc:kap:asiapa:v:40:y:2023:i:2:d:10.1007_s10490-021-09796-4
    DOI: 10.1007/s10490-021-09796-4
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10490-021-09796-4
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10490-021-09796-4?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
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Johan Wiklund & Dean Shepherd, 2003. "Aspiring for, and Achieving Growth: The Moderating Role of Resources and Opportunities," Journal of Management Studies, Wiley Blackwell, vol. 40(8), pages 1919-1941, December.
    2. Dirk Jenter & Katharina Lewellen, 2015. "CEO Preferences and Acquisitions," Journal of Finance, American Finance Association, vol. 70(6), pages 2813-2852, December.
    3. Samuel B. Bonsall IV & Eric R. Holzman & Brian P. Miller, 2017. "Managerial Ability and Credit Risk Assessment," Management Science, INFORMS, vol. 63(5), pages 1425-1449, May.
    4. Ulrike Malmendier & Geoffrey Tate, 2005. "CEO Overconfidence and Corporate Investment," Journal of Finance, American Finance Association, vol. 60(6), pages 2661-2700, December.
    5. Qin Yang & Monica Zimmerman & Crystal Jiang, 2011. "An Empirical Study of the Impact of CEO Characteristics on New Firms' Time to IPO," Journal of Small Business Management, Taylor & Francis Journals, vol. 49(2), pages 163-184, April.
    6. Nguyen, Nam H. & Phan, Hieu V., 2017. "Policy Uncertainty and Mergers and Acquisitions," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 52(2), pages 613-644, April.
    7. Xie, Jun, 2015. "CEO career concerns and investment efficiency: Evidence from China," Emerging Markets Review, Elsevier, vol. 24(C), pages 149-159.
    8. Bok Baik & David B. Farber & Sam (Sunghan) Lee, 2011. "CEO Ability and Management Earnings Forecasts," Contemporary Accounting Research, John Wiley & Sons, vol. 28(5), pages 1645-1668, December.
    9. Pol Herrmann & Deepak K Datta, 2002. "CEO Successor Characteristics and the Choice of Foreign Market Entry Mode: An Empirical Study," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 33(3), pages 551-569, September.
    10. Elie Matta & Paul W. Beamish, 2008. "The accentuated CEO career horizon problem: evidence from international acquisitions," Post-Print hal-00486653, HAL.
    11. Shleifer, Andrei & Vishny, Robert W., 2003. "Stock market driven acquisitions," Journal of Financial Economics, Elsevier, vol. 70(3), pages 295-311, December.
    12. Hitesh Doshi & Praveen Kumar & Vijay Yerramilli, 2018. "Uncertainty, Capital Investment, and Risk Management," Management Science, INFORMS, vol. 64(12), pages 5769-5786, December.
    13. Pol Herrmann & Deepak K. Datta, 2006. "CEO Experiences: Effects on the Choice of FDI Entry Mode," Journal of Management Studies, Wiley Blackwell, vol. 43(4), pages 755-778, June.
    14. Jerayr (John) Haleblian & Gerry McNamara & Kalin Kolev & Bernadine J. Dykes, 2012. "Exploring firm characteristics that differentiate leaders from followers in industry merger waves: a competitive dynamics perspective," Strategic Management Journal, Wiley Blackwell, vol. 33(9), pages 1037-1052, September.
    15. Peter Demerjian & Baruch Lev & Sarah McVay, 2012. "Quantifying Managerial Ability: A New Measure and Validity Tests," Management Science, INFORMS, vol. 58(7), pages 1229-1248, July.
    16. Li, Xiaoyang & Low, Angie & Makhija, Anil K., 2017. "Career concerns and the busy life of the young CEO," Journal of Corporate Finance, Elsevier, vol. 47(C), pages 88-109.
    17. Huang, Qianqian & Jiang, Feng & Lie, Erik & Yang, Ke, 2014. "The role of investment banker directors in M&A," Journal of Financial Economics, Elsevier, vol. 112(2), pages 269-286.
    18. Offenberg, David & Pirinsky, Christo, 2015. "How do acquirers choose between mergers and tender offers?," Journal of Financial Economics, Elsevier, vol. 116(2), pages 331-348.
    19. Jay B. Barney, 1988. "Returns to bidding firms in mergers and acquisitions: Reconsidering the relatedness hypothesis," Strategic Management Journal, Wiley Blackwell, vol. 9(S1), pages 71-78, June.
    20. Serfling, Matthew A., 2014. "CEO age and the riskiness of corporate policies," Journal of Corporate Finance, Elsevier, vol. 25(C), pages 251-273.
    21. Morris A. Cohen & Jehoshua Eliasberg & Teck-Hua Ho, 1996. "New Product Development: The Performance and Time-to-Market Tradeoff," Management Science, INFORMS, vol. 42(2), pages 173-186, February.
    22. Boyan Jovanovic & Peter L. Rousseau, 2002. "The Q-Theory of Mergers," American Economic Review, American Economic Association, vol. 92(2), pages 198-204, May.
    23. Akbar Zaheer & Srilata Zaheer, 1997. "Catching the Wave: Alertness, Responsiveness, and Market Influence in Global Electronic Networks," Management Science, INFORMS, vol. 43(11), pages 1493-1509, November.
    24. 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.
    25. Xie, Feixue, 2009. "Managerial flexibility, uncertainty, and corporate investment: The real options effect," International Review of Economics & Finance, Elsevier, vol. 18(4), pages 643-655, October.
    26. Kini, Omesh & Williams, Ryan, 2012. "Tournament incentives, firm risk, and corporate policies," Journal of Financial Economics, Elsevier, vol. 103(2), pages 350-376.
    27. Mitchell, Mark L. & Mulherin, J. Harold, 1996. "The impact of industry shocks on takeover and restructuring activity," Journal of Financial Economics, Elsevier, vol. 41(2), pages 193-229, June.
    28. Manish Popli & Ashutosh Sinha, 2014. "Determinants of early movers in cross-border merger and acquisition wave in an emerging market: A study of Indian firms," Asia Pacific Journal of Management, Springer, vol. 31(4), pages 1075-1099, December.
    29. Steven N. Kaplan & Mark M. Klebanov & Morten Sorensen, 2012. "Which CEO Characteristics and Abilities Matter?," Journal of Finance, American Finance Association, vol. 67(3), pages 973-1007, June.
    30. Teng Zhang & Sanjiv Sabherwal & Narayanan Jayaraman & Stephen P. Ferris, 2016. "The Young and the Restless: A Study of Age and Acquisition Propensity of CEOs of UK Firms," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 43(9-10), pages 1385-1419, October.
    31. Hsu, Wen-Tsung & Chen, Hsiang-Lan & Cheng, Chia-Yi, 2013. "Internationalization and firm performance of SMEs: The moderating effects of CEO attributes," Journal of World Business, Elsevier, vol. 48(1), pages 1-12.
    32. Meglio, Olimpia & King, David R. & Risberg, Annette, 2017. "Speed in acquisitions: A managerial framework," Business Horizons, Elsevier, vol. 60(3), pages 415-425.
    33. Cao, Jerry X., 2011. "IPO Timing, Buyout Sponsors’ Exit Strategies, and Firm Performance of RLBOs," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 46(4), pages 1001-1024, August.
    34. David J. Teece & Gary Pisano & Amy Shuen, 1997. "Dynamic capabilities and strategic management," Strategic Management Journal, Wiley Blackwell, vol. 18(7), pages 509-533, August.
    35. Yim, Soojin, 2013. "The acquisitiveness of youth: CEO age and acquisition behavior," Journal of Financial Economics, Elsevier, vol. 108(1), pages 250-273.
    36. Chen, Charles J.P. & Li, Zengquan & Su, Xijia & Sun, Zheng, 2011. "Rent-seeking incentives, corporate political connections, and the control structure of private firms: Chinese evidence," Journal of Corporate Finance, Elsevier, vol. 17(2), pages 229-243, April.
    37. Mauro Romano & Alessandro Cirillo & Donata Mussolino & Luca Pennacchio, 2019. "CEO career horizons and when to go public: the relationship between risk-taking, speed and CEO power," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 23(1), pages 139-163, March.
    38. Harford, Jarrad, 2005. "What drives merger waves?," Journal of Financial Economics, Elsevier, vol. 77(3), pages 529-560, September.
    39. Fuad, Mohammad & Gaur, Ajai S., 2019. "Merger waves, entry-timing, and cross-border acquisition completion: A frictional lens perspective," Journal of World Business, Elsevier, vol. 54(2), pages 107-118.
    40. von den Driesch, Till & Eva Susanne da Costa, Maika & Christina Flatten, Tessa & Brettel, Malte, 2015. "How CEO experience, personality, and network affect firms' dynamic capabilities," European Management Journal, Elsevier, vol. 33(4), pages 245-256.
    41. Hu, Nan & Li, Lu & Li, Hui & Wang, Xing, 2020. "Do mega-mergers create value? The acquisition experience and mega-deal outcomes," Journal of Empirical Finance, Elsevier, vol. 55(C), pages 119-142.
    Full references (including those not matched with items on IDEAS)

    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. Ismail, Ahmad & Mavis, Christos P., 2022. "A new method for measuring CEO overconfidence: Evidence from acquisitions," International Review of Financial Analysis, Elsevier, vol. 79(C).
    2. Trabert, Sebastian, 2023. "Do younger CEOs really increase firm risk? Evidence from sudden CEO deaths," Journal of Corporate Finance, Elsevier, vol. 79(C).
    3. Kabir, Rezaul & Li, Hao & Veld-Merkoulova, Yulia, 2018. "Do managers act opportunistically towards the end of their career?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 56(C), pages 218-232.
    4. Bonaime, Alice & Gulen, Huseyin & Ion, Mihai, 2018. "Does policy uncertainty affect mergers and acquisitions?," Journal of Financial Economics, Elsevier, vol. 129(3), pages 531-558.
    5. Manish Popli & Ashutosh Sinha, 2014. "Determinants of early movers in cross-border merger and acquisition wave in an emerging market: A study of Indian firms," Asia Pacific Journal of Management, Springer, vol. 31(4), pages 1075-1099, December.
    6. Feng, Yun & Liu, Chelsea & Yawson, Alfred, 2023. "Economic shocks, M&A advisors, and industry takeover activity," Pacific-Basin Finance Journal, Elsevier, vol. 82(C).
    7. Gu, Ming & Li, Dongxu & Ni, Xiaoran, 2022. "Too much to learn? The (un)intended consequences of RegTech development on mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 76(C).
    8. He Xiao, 2023. "Institutional investors' corporate site visits and corporate investment efficiency," International Review of Finance, International Review of Finance Ltd., vol. 23(2), pages 359-392, June.
    9. An, Suwei, 2023. "Essays on incentive contracts, M&As, and firm risk," Other publications TiSEM dd97d2f5-1c9d-47c5-ba62-f, Tilburg University, School of Economics and Management.
    10. Ahsan, Faisal Mohammad & Fuad, Mohammad & Sinha, Ashutosh Kumar, 2021. "Seeking strategic assets within cross-border acquisition waves: a study of Indian firms," Journal of International Management, Elsevier, vol. 27(4).
    11. Zeng, Xiaoming & Chen, Hao & Yin, Yanzhao & Liu, Youjin, 2024. "CEOs’ financial work experience and firms’ outbound investments," Journal of Multinational Financial Management, Elsevier, vol. 74(C).
    12. Rahaman, Mohammad M., 2014. "Do managerial behaviors trigger firm exit? The case of hyperactive bidders," The Quarterly Review of Economics and Finance, Elsevier, vol. 54(1), pages 92-110.
    13. Martynova, Marina & Renneboog, Luc, 2008. "A century of corporate takeovers: What have we learned and where do we stand?," Journal of Banking & Finance, Elsevier, vol. 32(10), pages 2148-2177, October.
    14. Li, Xiaoyang & Low, Angie & Makhija, Anil K., 2017. "Career concerns and the busy life of the young CEO," Journal of Corporate Finance, Elsevier, vol. 47(C), pages 88-109.
    15. Chia-Hsien Tang & Yen-Hsien Lee & Ming-Chih Lee & Ya-Ling Huang, 2020. "CEO Characteristics Enhancing the Impact of CEO Overconfidence on Firm Value After Mergers and Acquisitions — A Case Study in China," Review of Pacific Basin Financial Markets and Policies (RPBFMP), World Scientific Publishing Co. Pte. Ltd., vol. 23(01), pages 1-19, March.
    16. Ilya R. P. Cuypers & Charmi Patel & Gokhan Ertug & Jiatao Li & Youtha Cuypers, 2022. "Top management teams in international business research: A review and suggestions for future research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(3), pages 481-515, April.
    17. John Berns & Patty Bick & Ryan Flugum & Reza Houston, 2022. "Do changes in MD&A section tone predict investment behavior?," The Financial Review, Eastern Finance Association, vol. 57(1), pages 129-153, February.
    18. Chari, Murali D.R. & David, Parthiban & Duru, Augustine & Zhao, Yijiang, 2019. "Bowman's risk-return paradox: An agency theory perspective," Journal of Business Research, Elsevier, vol. 95(C), pages 357-375.
    19. Burney, Robert B. & James, Hui Liang & Wang, Hongxia, 2021. "Working capital management and CEO age," Journal of Behavioral and Experimental Finance, Elsevier, vol. 30(C).
    20. Jarkko Peltomäki & Jukka Sihvonen & Steve Swidler & Sami Vähämaa, 2021. "Age, gender, and risk‐taking: Evidence from the S&P 1500 executives and market‐based measures of firm risk," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 48(9-10), pages 1988-2014, October.

    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:kap:asiapa:v:40:y:2023:i:2:d:10.1007_s10490-021-09796-4. 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: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    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.