Generalist vs. Specialist CEOs: How CEO human capital shapes firm acquisition behavior and success

• Main Authors: CHEN, Guoli., HUANG, Sterling
• Format: text
• Language: English
• Published: Institutional Knowledge at Singapore Management University 2017
• Subjects: CEO; human capital; mergers & acquisitions; Organizational Behavior and Theory; Strategic Management Policy
• Online Access: https://ink.library.smu.edu.sg/soa_research/2036
• Institution: Singapore Management University

We examine how the general human capital of CEOs affects the acquisition behavior and performance of firms. Making use of micro-data on CEOs and the acquisitions they engage in, we find that generalist CEOs (CEOs with high degrees of general human capital) engage in more acquisitions than specialist CEOs who engage in more internal development; our evidence also shows that generalist CEOs are also more likely to engage in a higher proportion of diversifying acquisitions than specialist CEOs. Interestingly, we find that generalist CEOs create more value in diversifying acquisitions while specialist CEOs create more value in within-industry acquisitions, underscoring the importance of fit between executive human capital and the strategic initiatives they engage in. The above effects are even stronger the higher the variable compensation of the CEO is, suggesting that CEOs are more likely to actively deploy their human capital appropriately to opportunities if they share in the rents generated from their human capital deployment. Our paper contributes to the literatures on human capital, strategic leadership and the micro-foundations of the resource based view.