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
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.
| 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
Retrieved from https://ijsab.com/wp-content/uploads/707.pdf
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.
DOI: https://doi.org/10.5281/zenodo.4540014