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School of Business | Department of Finance | Finance | 2015
Thesis number: 13855
The impact of CEO's education on acquisitiveness - Evidence from Germany
Author: Raveala, Terhi
Title: The impact of CEO's education on acquisitiveness - Evidence from Germany
Year: 2015  Language: eng
Department: Department of Finance
Academic subject: Finance
Index terms: rahoitus; financing; yrityskaupat; corporate acquisitions; johtaminen; management; johtajat; managers; psykologia; psychology; käyttäytyminen; behaviour; koulutus; training
Pages: 76
Key terms: financing; rahoitus; corporate acquisitions; yrityskaupat; managers; johtajat; Germany; Saksa

The educational background of CEOs plays a relatively important role for the professional status of the CEOs in Germany. Further, Germany has an unusually high amount of top executives that hold doctoral degrees compared to other countries such as U.S. and U.K. Moreover, studies have found evidence indicating that educational background seems to have an impact on corporate decisions and that the impact is especially large on M&A decisions. Consequently, the purpose of this study is to analyze the impact of CEO's educational background on acquisitiveness of the firm in the German context. This study examines the impact of educational background from two different perspectives: the level of education and type of education.


The sample consists of 157 firms with 343 CEOs and 686 acquisitions between years 1988 and 2013. The sample of this study is compiled from several databases and part of the information is hand- collected. The effect of the educational background of a CEO on acquisitiveness is investigated using a logistic model. Overall, logistic regressions are estimated using three procedures by varying whether fixed effects are used or not. The dependent variable in this thesis is a binary, which identifies whether or not a firm made at least one acquisition in a particular year. The hypotheses suggest that CEOs with doctoral degrees would have a negative effect on acquisition propensity whereas the effect is expected to be positive for CEOs with economics degrees. Finally, an interaction of the previous two hypotheses suggests that the effect is negative for CEOs with doctoral degrees in economics.


In contrast to the expectations, the results show that CEOs with doctoral degrees are associated with higher likelihood of conducting acquisitions. It seems that firms with CEOs with doctoral degrees are 24.7% more likely to conduct acquisitions than their peers. However, when controlling for all unobserved characteristics using firm-fixed effects this significant effect is eliminated. This result seems to be driven by selection effects. Further, the results considering the effect of economics education and the effect of doctoral level economics education on acquisitiveness are positive but insignificant and thus these degrees cannot explain acquisition propensity of firms in this sample.

In addition, the results reveal that in general older CEOs seem to make less acquisitions and CEOs with longer tenure seem to make more acquisitions than their peers. The results also indicate that larger firms are more acquisitive. Further, firms with longer-tenured CEOs with doctoral degrees seem to be more acquisitive than their peers. Moreover, firms with doctorate CEOs seem to make more cross-border acquisitions and in contrast, firms with business-educated CEOs seem to make less cross-border acquisitions than their peers.
Master's theses are stored at Learning Centre in Otaniemi.