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Diversifying or Focused Acquisition? The Influence of CEOs Temporal Focus on Corporate Acquisition Target Choice and the Moderating Role of Corporate Governance Nuru M. Ahmed & Jianfeng Wu

Diversifying or Focused Acquisition? The Influence of CEOs Temporal Focus on Corporate Acquisition Target Choice and the Moderating Role of Corporate Governance

Author (s)

Nuru M. Ahmed & Jianfeng Wu

Abstract

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Why an acquiring firm chooses a target over others is a question yet not investigated well. Using a multi-dimensional temporal focus framework and upper echelon theory, we proposed that a firm’s choice for diversifying or focused acquisition is predicted by the CEO’s temporal focus. Furthermore, this link is contingent on corporate governance (compensation). The result from the analysis of 302 M&A deals from semiconductor and pharmaceutical industries revealed that CEOs with high future/present focus are more likely to make a diversifying acquisition than focus acquisition, while present-focused CEOs are more likely to make a focused acquisition over diversifying takeover. With a high stock option, future-focused CEOs will be more eager to make diversifying acquisitions, while past-focused CEOs’ likelihood of making a focused acquisition is reduced. Also, with high stock ownership, the interest of future and present-focused CEOs for diversifying takeover will reduce, while CEOs with high past focus will more tend to make a focused acquisition.

 Keywords: CEO temporal focus, Acquisition target choice, Upper echelon theory, CEOs compensation, Diversifying acquisition, Focused acquisition.

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Title:Diversifying or Focused Acquisition? The Influence of CEOs Temporal Focus on Corporate Acquisition Target Choice and the Moderating Role of Corporate Governance
Author:Nuru M. Ahmed & Jianfeng Wu
Journal Name:International Journal of Science and Business
Website:ijsab.com
ISSN:ISSN 2520-4750 (Online), ISSN 2521-3040 (Print)
DOI:https://doi.org/10.5281/zenodo.4540014
Media:Online
Volume:5
Issue:4
Acceptance Date:09/02/2021
Date of Publication:13/02/2021
PDF URL:https://ijsab.com/wp-content/uploads/707.pdf
Free download:Available
Page:80-104
First Page:80
Last Page:104
Paper Type:Research Paper
Current Status:Published

 

Cite This Article:

Ahmed, N. M. & Wu, J. (2021). Diversifying or Focused Acquisition? The Influence of CEOs Temporal Focus on Corporate Acquisition Target Choice and the Moderating Role of Corporate Governance. International Journal of Science and Business, 5(4), 80-104. doi: https://doi.org/10.5281/zenodo.4540014

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About Author (s)

Nuru M. Ahmed (corresponding author), Business school, University of International Business and Economics, Chaoyang District, Beijing, P.R. China 100029. Email: DE201765018@uibe.edu.cn

Jianfeng Wu, Business school, University of International Business and Economics, Chaoyang District, Beijing, P.R. China 100029.

 

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DOI: https://doi.org/10.5281/zenodo.4540014