Aggressive CEOs and bank mergers and acquisitions

Abstract

The U.S. bank industry has seen a series of merger waves since 1980s. Despite of significant interest on determinants of these merger waves, little empirical research has examined the role of CEOs in influencing banks' mergers and acquisitions (M&As). This paper studies the effect of CEOs' aggressive attitude inherited from their countries of origin on bank M&As. CEOs play an important role in M&A deals because they have more involvement in M&As. Using the inter-state war data, I construct a new measure of bank CEOs' innate attitude of aggressiveness derived from their ancestry culture, and CEOs' countries of origin are identified from their surnames. I find that aggressive CEOs are more likely to acquire other banks during 1986 - 2015 period. Robustness tests show that the association still holds when using alternative measures for CEOs' aggressive attitude. Moreover, empirical evidence supports that long-term market perceptions are positively associated with CEOs' aggressive attitude in acquiring banks. It implies that the market values aggressive CEOs in bank M&As. In addition, this paper examines the effects of family environment and individualism culture on the association between CEO's aggressive attitude and bank M&As. The effect of CEOs' aggressive attitude cultivated in their cultural heritage is strengthened by family environment but weakened by individualism culture.