CEOs' cultural origin and financial decision-making
Abstract/Contents
- Abstract
- This multidisciplinary thesis explores CEOs' financial reporting and investment decisions by synthesizing insights from accounting, finance, sociology, criminology, and anthropology research. The thesis includes two independent chapters. The first chapter investigates the association between CEOs' social-class origin and propensity to commit financial reporting fraud. The chapter is motivated by criminological and sociological theories suggesting a higher social-class origin can both stimulate and restrain criminality. I find that whereas CEOs accused by the SEC of committing fraud are more likely to come from poor and working-class backgrounds, CEOs without fraud allegations are more likely to come from middle- and upper-class backgrounds. The pattern continues to hold in a subsample of founder CEOs, suggesting selection in the labor market is unlikely to explain the association between CEOs' social-class origin and financial reporting fraud. In addition, I do not find evidence that bias in the SEC's enforcement decisions drives the association. Echoing criminological theory, I find CEOs' educational background mediates the association between social-class origin and financial reporting fraud. This finding suggests that endowed resources such as social connections and academic credentials reduce CEOs' incentives to defraud by providing them with a safety net and increasing their reputational costs. The second chapter investigates the association between target firms' receptiveness to being acquired in mergers and acquisition transactions (M&A) and their CEOs' adherence to cultural norms enshrining the protection of personal honor. Our hypothesis that target CEOs' adherence to honor may explain the receptiveness to M&A is motivated by anthropological evidence suggesting men who grew up in societies that developed a culture of honor feel obliged to retaliate whenever their status and property are threatened. Consistent with this narrative, we find targets with CEOs who grew up in states with a culture of honor are more likely to repeatedly engage in withdrawn deals without being acquired—suggesting a lower receptiveness to M&A. The pattern continues to hold in a subsample of founder CEOs. Focusing on CEO transitions, we find targets are less likely to be acquired when they have a CEO from an honor state than a CEO from a nonhonor state. Together, these findings suggest selection in the labor market and omitted firm characteristics are unlikely to drive the association between target CEOs' adherence to honor and receptiveness to M&A. Lastly, in support of the honor narrative, we find that among CEOs from honor states, those who grew up in rural areas—where cultural norms enshrining honor were more likely to persist—are the least receptive to M&A.
Description
| Type of resource | text |
|---|---|
| Form | electronic resource; remote; computer; online resource |
| Extent | 1 online resource. |
| Place | California |
| Place | [Stanford, California] |
| Publisher | [Stanford University] |
| Copyright date | 2023; ©2023 |
| Publication date | 2023; 2023 |
| Issuance | monographic |
| Language | English |
Creators/Contributors
| Author | Spector, Ido |
|---|---|
| Degree supervisor | Kasznik, Ron |
| Thesis advisor | Kasznik, Ron |
| Thesis advisor | Goldberg, Amir |
| Thesis advisor | McNichols, Maureen, 1953- |
| Degree committee member | Goldberg, Amir |
| Degree committee member | McNichols, Maureen, 1953- |
| Associated with | Stanford University, Graduate School of Business |
Subjects
| Genre | Theses |
|---|---|
| Genre | Text |
Bibliographic information
| Statement of responsibility | Ido Spector. |
|---|---|
| Note | Submitted to the Graduate School of Business. |
| Thesis | Thesis Ph.D. Stanford University 2023. |
| Location | https://purl.stanford.edu/rd489ts0013 |
Access conditions
- Copyright
- © 2023 by Ido Spector
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