Do smart managers make better acquisitions? An empirical study on the effect of managerial characteristics on Swedish mergers and acquisitions

Sammanfattning: Recent studies have found that the characteristics of managers influence various corporate outcomes. This study examines the effect of two managerial characteristics; cognitive ability (intelligence) and leadership aptitude on mergers and acquisitions. Specifically, we study whether CEOs and CFOs with high cognitive ability and/or high leadership aptitude make more value creating acquisitions and whether cognitive ability and/or leadership aptitude affects the likelihood of making acquisitions. The study uses a unique data set from Swedish military enlistment tests and a sample of acquisitions made by listed Swedish companies between 1999 and 2011. We find that the likelihood of making an acquisition decreases as cognitive ability increases. This effect is the strongest in companies that are more able to make acquisitions because of better performance or more resources. We also find tendencies of that leadership aptitude is positively related to value creation. This finding is however dependent on how value creation is measured.