A study on CEO organizational identification, the propensity to be acquired, and bid premiums

Sammanfattning: We examine whether the propensity to be acquired is lower for companies with CEOs who identify strongly with their organization compared to those that do not, while further distinguishing if this effect is amplified by the CEO also being a board member. Additionally, the study examines if the bid premium accepted is higher for CEOs with high organizational identification relative to other CEOs. To investigate this, we use industry and year fixed effects regression models on an unbalanced panel dataset consisting of Swedish public companies and transactions between 2002 and 2017. To measure organizational identification, we construct a composite score of three publicly available CEO characteristics based on the psychology and accounting literature. We propose and find that the likelihood of being acquired is lower, and the bid premium higher, for CEOs with high organizational identification relative to other CEOs. The findings are consistent with previous research that demonstrate the impact of organizational identification on CEO behaviour, albeit the research question examined in this study is to our best knowledge unprecedented.