Balancing Both Sides of the Equation: Exploring the Joint Effects of Acquirer and Target CEO Hubris

Management scholars and colleagues in related fields have consistently identified CEO hubris as a significant factor in acquisitions. However, little attention has been devoted to target-CEO hubris as researchers have focused predominantly on acquiring CEOs. Given that research shows that target CEOs and their attributes are critical for acquisition outcomes, a more complete understanding of the role of executive hubris in acquisitions requires considering both acquirer and target sides. Building on prior works on hubris and related psychology research, this paper explores what the joint effects of acquirer and target CEO hubris might be for specific acquisition outcomes. It explains that the association between acquirer-CEO hubris and acquisition deal completion would be positive only when target-CEO hubris is low. When target-CEO hubris is high, that relationship would more likely be negative. The paper further clarifies that the positive relationship between acquirer-CEO hubris and acquisition premium will be stronger when target-CEO hubris is high. Moreover, it argues that if a pair of more hubristic acquirer and target CEOs remain with a merged firm, the joint effect of their hubris on firm performance would more likely be positive. Overall, the paper has important implications for research on executive characteristics more broadly.