Journal of Financial and Quantitative Analysis Vol. 54 No. 5 2019
Hometown Biased Acquisitions
Abstract
We show that chief executive officers (CEOs) exhibit a hometown bias in acquisitions. Firms are over twice as likely to acquire targets located in the states of their CEOs’ childhood homes than similar targets domiciled elsewhere. Small, private home-state deals underperform other small, private deals, and the bias is stronger when acquirer governance is lax, suggesting that CEOs acquire private home-state targets for their own benefits. In contrast, large, public home-state acquisitions are value enhancing. CEOs create value in public home-state acquisitions by avoiding extremely poor deals and through deals with higher synergies. Thus, both agency issues and hometown advantages drive home-state acquisitions.
- DOI
- 10.1017/s002210901800131x
- Volume
- 54
- Issue
- 5
- Pages
- 2017-2051
- Language
- en
- Sources
- bibtex:phds-export.bib openalex crossref