CEOs Poverty Experience and Corporate Acquisitions

Abstract

In this study we examine whether a CEO’s poverty experiences in early life affect corporate strategy of acquisitions. Drawing upon insights of imprinting theory and inferiority-compensation logic, we argue that CEOs growing up in poverty environment, compared to their counterparts growing up in non-poverty environment, may experience a feeling of inferiority because of their disadvantageous background, which motivates them to undertake acquisitions so as to seek for compensation in material wealth, self-esteem, and social standing. We therefore posit that CEOs with poverty background (i.e., grew up in poverty environment) are likely to demonstrate a higher level of acquisitiveness. We further propose that the inferiority compensation logic will be strengthened when CEOs experienced famine or when their firms are located in more affluent regions. Evidence from public-listed manufacturing firms in China largely supports our predictions.