Foreign CEOs Get More out of Acquisitions

Foreign CEOs Get More out of Acquisitions


In the European Union, acquirers’ CEOs that were born outside the acquirer’s domicile are more likely to engage in cross-border mergers. Why does it happen? And do these transactions generate more or less profits? Antonio Marra and Angela Pettinicchio of the Bocconi University, with Ron Shalev (Rotman School of Management, University of Toronto), raise these questions in Home Sweet Home: CEOs Buying Firms in their Home Countries - Information Asymmetry or Home Bias. The authors focus on European Union firms to determine whether the country in which the CEO was born and raised drives the preference for domestic or cross-border mergers.
“Literature on Mergers & Acquisitions shows that these transactions are not always efficient. Sometimes they are disastrous”, Angela Pettinicchio says. According to data, non-domestically born CEOs are 87% more likely to engage in cross-border acquisitions. The relationship is driven by the CEOs’ preference to purchase in their own country of birth. There are two alternative explanations: the acquirer’s CEO may have a home bias, that is a non-rational bent towards the country of birth; or, the preference could stem from a superior knowledge of that country that allows him to mitigate information asymmetries.
“The latter seems to be the correct explanation. Acquisitions led by CEOs from the country of the target firm generate abnormal positive return in the following days compared to acquisitions led by domestically born CEOs”. The performance is better when the acquisition is led by recently hired non-domestically born CEOs. They are more equipped to mitigate information asymmetries because they have more up to date information and more recent connections in their country of birth. This ability is even more relevant when the CEO is born and raised in a country where the legal enforcement and the disclosure quality are weak.

Read more about this topic:
Gianmarco Ottaviano. The Cost of Non-Europe
Electoral Results Explained Through Emotion Theory
The Four Pillars of European Capitalism
Human Rights Are Increasingly Important
Transparency Means Banks Won’t Need to Be Saved
The Robot Vote Has Brought Success for Nationalists
The Importance of Reputation in Public Contract Bids
Finding a Compromise for Tomorrow’s Relations Between UE and UK
When It Comes to Fake News, Don’t Imitate the USA
A Common Identity Could Derive from the Protection of Civil Rights
Productivity Cannot Be Balanced with Computers
Europe Should Opt for Qualified Majority Voting on Taxation Issues
My Europe: Seven Bocconi alumni who work for various EU institutions tell us what Europe means to them

by Claudio Todesco


All News
  • Economics Research, Bocconi in the European Top 5

    In the Tilburg University ranking of the best universities for scientific performance in economics research, Bocconi is 4th in Europe, 1st in continental Europe, and 18th in the world  

  • Lockdown Measures Are Not the Only Things Keeping Us at Home

    Two Bocconi MSc students, in a team with two Oxford PhD students, had their paper published in two prestigious outlets. Observing mobility data from mobile devices, they found that people in the US often distanced themselves before official measures were imposed in counties with high education, high trust in science and high income  


  May 2020  
Mon Tue Wed Thu Fri Sat Sun
        1 2 3
4 5 6 7 8 9 10
11 12 13 14 15 16 17
18 19 20 21 22 23 24
25 26 27 28 29 30 31


All Seminars
  • Imperfect Macroeconomic Expectations: Evidence and Theory

    Marios Angeletos (MIT) Paper


  • The Commission's proposals for the Multiannual Financial Framework and the Recovery Instrument
    The EU Response to the Covid Crisis

    Chair Eleanor Spaventa, Bocconi University Speakers Mario Monti, President, Bocconi University; Catherine De Vries, Bocconi University; Guido Tabellini, Bocconi University To register, please contact