aggression in corporate takeovers

A Management Science article by has received a lot of press. “Deal or No Deal: Hormones and the Mergers and Acquisitions Game” is by Maurice Levi, Kai Li, and Feng Zhang at the University of British Columbia.  The story has now been picked up by Reuters, which means that it will be picked up by news outlets all over the world. But I heard it first from INFORMS.  The INFORMS article states

Younger CEOs are 4% more likely to initiate an attempt to acquire another company than older men, the study finds. In a more marked finding, male CEOs’ relative youth increases their likelihood of withdrawing a merger/acquisition bid by as much as 20%.

The authors also find that when companies being approached about a merger or acquisition have younger CEOs, there is a greater likelihood – by 2% – of a tender offer. Tender offers are used by bidding companies to bypass targeted companies’ leadership and directly contact stockholders to purchase controlling shares.

In the study, the main effect of high testosterone was upon CEOs on the bidding side of negotiations to acquire another company, not the CEOs of the target company. Nevertheless, target CEOs’ testosterone levels featured prominently when their refusal to continue negotiations led to a hostile takeover attempt.

Maurice Levi was featured on an INFORMS podcast last week.

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