The Role of Firm Reputation Between The Relationship of CEO Characteristics and Firm Performance After Merger and Acquisition

Abstract

Purpose: This study was conducted to examine the effect of CEO characteristics and firm reputation on firm performance after conducting mergers and acquisition. The object of this research is companies that carry out mergers and acquisitions listed on the Indonesia Stock Exchange (IDX) from 2014-2018. Design/methodology/approach: In selecting the sample, this research used a purposive sampling method. This study uses the SmartPLS program to analyze the data. Company performance is measured by Buy and Hold Abnormal Return. This study uses acquisition experience, previous acquisitions with positive performance, average acquisitions, acquisition success rate, experience in acquiring the same industry, and political connections to measure CEO characteristics. The Firm Reputation is measured by price earning ratio. Findings: The results of this research indicate that choosing a CEO who has high experience, knowledge, and capability will increase the firm's reputation and performance. Practical implications: The findings in this study will greatly help management to maximize the firm's performance when conducting mergers and acquisitions and management can also minimize failures by choosing a CEO who has the capability and is more experienced. Originality/value: The novelty of this research is implementing the theory of hubris and RBV by adding firm reputation as a mediating variable that strengthens the relationship between CEO characteristics and CEO political connections on firm performance after mergers and acquisitions.