Emerald Management Review:
The accentuated CEO career horizon problem: evidence from international acquisitions

Abstract:

Purpose - To study the nature of the 'career horizon' problem for chief executive officers (CEOs) and how this may affect the company's engagement in international acquisitions.

Design/methodology/approach - A review of the literature of international acquisitions and the CEO career horizon problem is presented to provide the basis for hypotheses relating to the factors concerned. Reports the results of the study to test the hypotheses in which data relating to a longitudinal sample 293 public US-incorporated companies, for 1995-1999, was analysed for a number of CEO variables, including: the dependent variable (engagement in international acquisitions); independent variables (CEO career horizon, CEO in-the-money options holdings, CEO equity holdings); and controls (CEO educational level, CEO functional background, CEO international experience, CEO tenure, CEO salary and bonus etc).

Findings - The results supported the study hypotheses that: there is a positive relationship between the CEO's career horizon and the likelihood of company engagement in international acquisitions; CEO equity holdings moderate the relationship between CEO career horizon and the likelihood of company engagement in international acquisitions, with higher value of equity holdings making this relationship more positive; and in-the-money CEO option holdings moderate the relationship between CEO career horizon and the likelihood of engagement in international acquisitions, with higher value of in-the-money option holdings making this relationship more positive.

Research limitations/implications - The research was limited by the use of US companies only (limiting generalizability), and the derivation of the accentuated career horizon problem through an application of the prospect theory mechanisms.

Originality/value - Highlights the importance of incentives provided to CEOs along their career path.

Keywords:

Article Type:

Research paper

Reference:

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