Another in a growing list of papers that claim to show managers' biases influence firm decisions. In this paper the authors take a tack away from manager's individual characteristics and focus on where they are from:
"... argue that managerial risk aversion at a national level is a cultural trait and affects the net synergies. CEOs of firms located in countries with higher level of risk aversion, measured by Hofstede’s (2001) uncertainty avoidance score, show less takeover activity, engage more in diversifying takeovers and require higher premiums on takeovers...."
" In this paper, we explore the question of how risk aversion as a cultural trait impacts acquisition decisions at a country level using a national measure of risk aversion, Hofstede’s (2001) uncertainty avoidance measure. We argue that since takeovers are a risk to the firm’s value and hence a CEO’s position, a more risk averse CEO will require higher compensation before undertaking an acquisition. Hence, a more risk-averse CEO will only engage in a takeover if the expected net synergies are large enough."
and that is exactly what they find. Interesting.
Cite: Lehnert, Thorsten, Frijns, Bart, Gilbert, Aaron B. and Tourani Rad, Alireza , Cultural Values, CEO Risk Aversion and Corporate Takeovers (October 12, 2011). Paris December 2011 Finance Meeting EUROFIDAI - AFFI. Available at SSRN: http://ssrn.com/abstract=1942971