Does managerial ability drive frequent acquisitions? The role of strategic agency, firm innovativeness, and environmental uncertainty

Chandra S. Mishra

International Review of Economics & Finance, 2023, vol. 88, issue C, 861-873

Abstract: The strategic agency hypothesis in emerging behavioral theory of the firm suggests that high ability managers have strategic foresight to search distant regions to sense and seize innovative opportunities. Conventional behavioral theory based suggests that managers conduct myopic searches to discover growth opportunities. We test the strategic agency hypothesis in that we investigate the association between strategic managerial ability and the firm's propensity for frequent acquisition using a sample of 5496 firm-year observations over the 2000–2016 period. We find that high strategic ability managers are more likely to pursue frequent acquisitions when the acquirer is innovative and operates in a risky environment. Our results are consistent with the strategic agency hypothesis in that managers with high strategic ability have sufficient strategic foresight to sense and seize growth opportunities via frequent acquisitions in a timely manner.

Keywords: Strategic agency; Managerial ability; Serial acquirers (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:88:y:2023:i:c:p:861-873

DOI: 10.1016/j.iref.2023.07.026

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