Time to complete the due diligence phase in mergers and acquisitions: impact of CEO psychological characteristics. Issue 50 (27th October 2021)

• Record Type: Journal Article
• Authors: Gada, Viswa Prasad; Popli, Manish; Malhotra, Shavin
• Is Part Of: Applied economics. Volume 53:Issue 50(2021)
• Page Start: 5812
• Page End: 5825
• Publication Date: 2021-10-27
• Subjects: CEO -- deal duration -- due diligence phase -- mergers and acquisitions -- prevention focus -- regulatory focus theory; Economics -- Periodicals; 330
• DOI: 10.1080/00036846.2021.1931005
• Languages: English
• ISSNs: 0003-6846

Abstract

ABSTRACT: The CEO is the chief decision-maker with regard to corporate strategy, and extant literature highlights how CEOs' psychological characteristics inform firms' risky strategic choices. In this article, we focus instead on how CEOs' psychological characteristics might lead to risk-mitigation actions. Building on the regulatory focus theory, we investigate the impact of CEO's prevention focus on the due diligence process in merger and acquisition (M&A) deals. Using a sample of 339 majority-stake completed M&A deals by public firms from the United Kingdom, we find that CEOs having a stronger prevention focus increases the time these firms take to complete their M&A deals. We also find that this effect is mitigated when firms acquire target firms in related industries.