Aggressive CEOs and bank mergers and acquisitions

Abstract

The U.S. banking industry has seen waves of mergers since the 1980s. Despite a significant body of research on the determinants of these waves, there are few studies of how CEOs influence banks’ mergers and acquisitions (M&As). This paper studies the effect of CEO aggressiveness on bank M&As. We construct a new measure of bank CEO aggressiveness based on CEOs’ ancestral countries of origin and data on inter-country wars. We find that aggressive CEOs are more likely to acquire other banks. Moreover, the impact of CEO aggressiveness on bank M&A decisions is more pronounced when the CEOs are from larger and more profitable banks, when CEOs have a longer tenure, and when CEOs’ ancestral country of origin has a more masculine culture. Moreover, we show that aggressive CEOs are more likely to make acquisitions when CEOs possess more cultural maintenance, which captures the extent to which CEOs retain their original cultural values and beliefs. Finally, we document positive short-term stock market reactions to bank M&As initiated by aggressive CEOs.