Practice makes perfect? The effect of CEO and director experience on acquisition performance

Abstract

This study replicates and extends the results of Field and Mkrtchyan, who find that independent directors' prior acquisition experience improves succeeding acquisition performance. First, using both the original and an extended sample period, we confirm their findings. Second, we extend their study by considering the effect of prior acquisition experience gained by the CEO as an executive or independent director. Similar to the effect documented for independent directors, we find that CEOs' acquisition experience is positively associated with subsequent acquisition performance. Consistent with CEO learning, we document a greater effect on subsequent takeover performance when acquisition experience is negative.

Learning‐by‐doing: the experience effect in mergers and acquisitions

“…Finally, we decompose prior acquisition experience into experience from positive CARs and experience from negative CARs. Similar to Jeganathan et al (2020), we find that the experience effect exists for experience from prior acquisitions with negative CARs, which indicates that firms learn from mistakes.…”

The effect of CEO and director experience on acquisition performance: a pitch

“…The Faff (2015Faff ( , 2019 pitching template provided structure and improved the quality of the paper titled "Practice makes perfect? The effect of CEO and director experience on acquisition performance", published in Accounting and Finance (Jeganathan et al, 2020).…”

“…This pitching research letter discusses the application of the pitching research template developed by Faff (2015Faff ( , 2019 to a research project examining the effect of independent directors' acquisition experience on subsequent acquisition performance. The pitch was developed alongside a senior mentor and another early career researcher as part of the application to the "Shark tank" event held by the Accounting and Finance Association of Australia and New Zealand (AFAANZ) Finance Special Interest Group and was then developed into a research paper which was accepted by the Accounting and Finance Journal (Jeganathan et al, 2020) [1]. As an early career researcher, I found this whole process very rewarding and valuable, as it provided guidance on how to develop and fine-tune a research idea in a structured, concise and logical manner.…”

Chief Executive Officer Proactive Personality and Acquisitions: A Fuzzy Set Qualitative Comparative Analysis of China's Listed Firms

“…The personal ambition of a manager in the job requirements is presented as a desire for success and self-actualization. High job requirements drive managers to take shortcuts and to rely on their previous successful experiences; in turn, their previous experience will have a stronger influence on their decisions (Jeganathan et al, 2021 ).…”

“…Chen et al ( 2021 ) found that the fit between CEO human capital makeup and their type of acquisitions relates to stronger performance. Moreover, studies exist on the educational background (Wang and Yin, 2018 ), social status (Plaksina et al, 2019 ), executive migration (Wang, 2019 ), supply chain industry experience (Burns et al, 2021 ), and multiple merger experience (Jeganathan et al, 2021 ). Acquisitions by firms with high managerial ability generated better abnormal returns at the announcement as well as better post-announcement abnormal returns than firms with low managerial ability did (Chen and Lin, 2018 ).…”