The Cultural Origin of CEOs’ Attitudes toward Uncertainty: Evidence from Corporate Acquisitions

Yihui Pan, Stephan Siegel () and Tracy Yue Wang

The Review of Financial Studies, 2020, vol. 33, issue 7, 2977-3030

Abstract: We examine the role of cultural heritage in shaping U.S. CEOs’ attitudes toward uncertainty, in the context of their corporate acquisition decisions. We find that CEOs with a more uncertainty-avoiding cultural heritage are less likely to engage in acquisitions. Conditional on making an acquisition, uncertainty-averse CEOs prefer targets in familiar industries and targets that can be more easily integrated. The emphasis on cultural identity by CEOs’ parents and the ethnic composition of CEOs’ early life environment significantly influence the cultural transmission process. Cultural differences about uncertainty attitudes persist over multiple generations, but become less pronounced over time. (JEL G34, G4, G40, G41)

Date: 2020
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