THE EFFECT OF CEO POLITICAL IDEOLOGY ON MERGERS & ACQUISITIONS

Abstract

The central question of this research is to examine to what extent a CEO’s political ideology has an influence on mergers and acquisition decisions. This research is based on previous literature and research about behavioral consistency and how personal characteristics and ideologies of CEOs work through to corporate decision making. Empirical results were based on a sample of 138 firms in the Netherlands stock market index from 2017-2021. The results suggest that right-wing CEOs are not less likely to engage in M&A activities, which is contradictory with previous literature and the first proposed hypothesis, as right-wing CEOs were considered to be more conservative in their corporate investment decisions. However, the effect is not found significant. It is found that right-wing CEOs are less likely to use stock as a payment method. The direction is consistent with the hypothesis, but not a significant result is found. Right-wing CEOs are significantly less likely to engage in focus-increasing deals, which is not consistent with earlier argumentation about their preference to remain the status quo and preference for familiar stimuli. This research makes an important contribution to already existing research as it considers the dutch political system for the first time.