CEO characteristics, firm reputation and firm performance after merger and acquisition
Abstract
This study examine the impact of Firm reputation and CEO Characteristics toward firm performance after corporate action acquisition and merger. This study also examines how CEO characteristics mediates firm reputation to maximize firm performance after acquisition. This research objectives are firm that listed in Indonesia stock exchange between 2010 till 2016 and executing corporate action mergers and acquisitions. To select the research sample, this research conducted purposive sampling. This research data analysis are using e-views program to conduct descriptive statistical test, outlier test and hypothesis test. The results of this study show that by choosing an experienced, capable and aggressive CEO can maximize firm reputation and firm performance. We also find that a capable and experienced CEO able to mediates firm reputation as resources for maximize the firm performance. These research findings will be helpful for management in maximize firm performance by using acquisition and merger as business strategy, management can set the standard requirement for firm reputation and choosing a new CEO to take charge in acquisition project as their intangible resources. The novelty of this research are provide a new insight of acquisition as how CEO characteristics effect firm performance by using firm reputation as mediating variable.
Keyword : acquisition, CEO characteristics, firm performance, firm reputation, Indonesia, mergers
How to Cite
Edi, Basri, Y. Z., & Arafah, W. (2020). CEO characteristics, firm reputation and firm performance after merger and acquisition. Business: Theory and Practice, 21(2), 850-858. https://doi.org/10.3846/btp.2020.12782
This work is licensed under a Creative Commons Attribution 4.0 International License.
References
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Baker, M., Pan, X., & Wurgler, J. (2012). The effect of reference point prices on mergers and acquisitions. Journal of Financial Economics, 106(1), 49–71. https://doi.org/10.1016/j.jfineco.2012.04.010
Barkema, H. G., & Schijven, M. (2008). How do firms learn to make acquisitions? A review of past research and an agenda for the future. Journal of Management, 34(3), 594–634. https://doi.org/10.1177/0149206308316968
Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108
Borghesi, R., Houston, J. F., & Naranjo, A. (2014). Corporate socially responsible investments: CEO altruism, reputation, and shareholder interests. Journal of Corporate Finance, 26, 164–181. https://doi.org/10.1016/j.jcorpfin.2014.03.008
Carmo, G. G. A. do, & Marcondes, R. C. (2016). Mergers and acquisitions with a focus on resources and organizational capabilities. Rebrae, 9(766), 26. https://doi.org/10.7213/rebrae.09.001.AO02
Cellier, A., & Chollet, P. (2016). The effects of social ratings on firm value. Research in International Business and Finance, 36, 656–683. https://doi.org/10.1016/j.ribaf.2015.05.001
Chalençon, L., Colovic, A., Lamotte, O., & Mayrhofer, U. (2017). Reputation, e-reputation, and value-creation of mergers and acquisitions. International Studies of Management and Organization, 47(1), 4–22. https://doi.org/10.1080/00208825.2017.1241086
Chatterjee, S. (1986). Types of synergy and economic value: The impact of acquisitions on merging and rival firms. Strategic Management Journal, 7(2), 119–139. https://doi.org/10.1002/smj.4250070203
Cho, S. Y., & Arthurs, J. D. (2018). The influence of alliance experience on acquisition premiums and post-acquisition performance. Journal of Business Research, 88(May 2017), 1–10. https://doi.org/10.1016/j.jbusres.2018.02.022
Chun, R., & Davies, G. (2010). The effect of merger on employee views of corporate reputation: Time and space dependent theory. Industrial Marketing Management, 39(5), 721–727. https://doi.org/10.1016/j.indmarman.2010.02.010
Cuypers, I. R. P., Cuypers, Y., & Martin, X. (2017). When the target may know better: Effects of experience and information asymmetries on value from mergers and acquisitions. Strategic Management Journal, 38(3), 609–625. https://doi.org/10.1002/smj.2502
Das, A., & Kapil, S. (2016). Determinants of acquisitions in Chinese technology firms: An empirical investigations. Asia-Pasific Journal of Business Administrations, 8(2), 127–142. https://doi.org/10.1108/APJBA-06-2013-0052
Davies, G., & Chun, R. (2004). A reputational perspective on mergers. Advances in Mergers and Acquisitions, 3, 131–148. https://doi.org/10.1016/S1479-361X(04)03006-6
Edi, E., & Cen, S. (2016). Analisis akuisisi terhadap keuangan perusahaan pengakuisisi dan diakuisisi terdaftar di bursa efek Indonesia. Jurnal Benefita, 1(3), 113–122. https://doi.org/10.22216/jbe.v1i3.1434
Edi, E., & Rusadi, S. (2017). Analisis Pengukuran Kinerja Keuangan Pasca Merger dan Akuisisi Pada Perusahaan yang Terdaftar di BEI. Jurnal Benefita, 2(3), 230–242. https://doi.org/10.22216/jbe.v2i3.1435
Edi, E., & Saputra, E. (2019). The effect of director experience on acquisition performance. Journal of Accounting Finance and Auditing Studies (JAFAS), 5(4), 136–150. https://doi.org/10.32602/jafas.2019.42
Erden, Z., Klang, D., Sydler, R., & von Krogh, G. (2015). “How can we signal the value of our knowledge?” Knowledge-based reputation and its impact on firm performance in science-based industries. Long Range Planning, 48(4), 252–264. https://doi.org/10.1016/j.lrp.2014.07.003
Faff, R., Prasadh, S., & Shams, S. (2019). Merger and acquisition research in the Asia-Pacific region: A review of the evidence and future directions. Research in International Business and Finance, 50(June), 267–278. https://doi.org/10.1016/j.ribaf.2019.06.002
Ferreira, M. P., Santos, J. C., Almeida, M. I. R. de, & Reis, N. R. (2014). Mergers & acquisitions research: A bibliometric study of top strategy and international business journals, 1980–2010. Journal of Business Research, 67(12), 2550–2558. https://doi.org/10.1016/j.jbusres.2014.03.015
Fombrun, C. J., & van Riel, C. B. M. (1997). The reputational landscape. Corporate Reputation Review, 1(1), 5–13. https://doi.org/10.1057/palgrave.crr.1540008
Fombrun, C., & Shanley, M. (1990). What’s in a name? Reputation building and corporate strategy. Academy of Management Journal, 33(2), 233–258. https://doi.org/10.2307/256324
Fong, C. M., & Lee, C. L. (2012). Reputation spillover effects and post-acquisition performance: a customer perspective. In Advances in Mergers and Acquisitions, Vol. 11 (pp. 139–154). Emerald Group Publishing Limited. https://doi.org/10.1108/S1479-361X(2012)0000011010
Gao, C., Zuzul, T., Jones, G., & Khanna, T. (2017). Overcoming Institutional voids: a reputation-based view of long-run survival. Strategic Management Journal, 38(11), 2147–2167. https://doi.org/10.1002/smj.2649
García-Meca, E., & Palacio, C. J. (2018). Board composition and firm reputation: The role of business experts, support specialists and community influentials. BRQ Business Research Quarterly, 21(2), 111–123. https://doi.org/10.1016/j.brq.2018.01.003
Gow, I. D., Wahid, A. S., & Yu, G. (2018). Managing reputation: Evidence from biographies of corporate directors. Journal of Accounting and Economics, 66(2–3), 448–469. https://doi.org/10.1016/j.jacceco.2018.08.009
Haleblian, J. J., Pfarrer, M. D., & Kiley, J. T. (2017). High-reputation firms and their differential acquisition behaviors. Strategic Management Journal, 38(11), 2237–2254. https://doi.org/10.1002/smj.2645
Haleblian, J., & Rajagopalan, N. (2011). The influence of acquisition experience and performance on acquisition behavior: evidence from the U.S. commercial banking industry. Academy of Management Journal, 49(2), 357–370. https://doi.org/10.5465/amj.2006.20786083
Kaur, A., & Singh, B. (2018). Measuring the immeasurable corporate reputation. Metamorphosis, 17(1), 53–64. https://doi.org/10.1177/0972622518778210
Lebedev, S., Peng, M. W., Xie, E., & Stevens, C. E. (2015). Mergers and acquisitions in and out of emerging economies. Journal of World Business, 50(4), 651–662. https://doi.org/10.1016/j.jwb.2014.09.003
McDonald, M. L., Westphal, J. D., & Graebner, M. E. (2008). What do they know? The effects of outside director acquisition experience on firm acquisition performance. Strategic Management Journal, 29(11), 1155–1177. https://doi.org/10.1002/smj.704
Mkrtchyan, A. (2013). The effect of director expertise on acquisition performance. SSRN Electronic Journal, 814–865. https://doi.org/10.2139/ssrn.2147169
Mulherin, J. H., Netter, J. M., & Poulsen, A. B. (2017). The evidence on mergers and acquisitions: a historical and modern report. In The handbook of the economics of corporate governance (1st ed.). Elsevier B.V. https://doi.org/10.1016/bs.hecg.2017.11.006
Musteen, M., Datta, D. K., & Kemmerer, B. (2010). Corporate reputation: Do board characteristics matter? British Journal of Management, 21(2), 498–510. https://doi.org/10.1111/j.1467-8551.2009.00676.x
Ogada, A., Njuguna, A., & Achoki, G. (2016). Effect of synergy on financial performance of merged financial institutions in Kenya. International Journal of Economics and Finance, 8(9), 199. https://doi.org/10.5539/ijef.v8n9p199
Ogunfowora, B. (2014). The impact of ethical leadership within the recruitment context: The roles of organizational reputation, applicant personality, and value congruence. Leadership Quarterly, 25(3), 528–543. https://doi.org/10.1016/j.leaqua.2013.11.013
Onakoya, O. A., Moses, C. L., Iyiola, O. O., Salau, O. P., & Ayoade, E. O. (2018). Dataset on ethical leadership and corporate reputation – Nigerian deposit money banks’ perspective. Data in Brief, 19, 847–852. https://doi.org/10.1016/j.dib.2018.05.094
Pfarrer, M. D., Pollock, T. G., & Rindova, V. P. (2010). A Tale of two assets: the effects of firm reputation and celebrity on earnings surprises and investors’ reactions. Academy of Management Journal, 53(5), 1131–1152. https://doi.org/10.5465/amj.2010.54533222
Popli, M., Ladkani, R. M., & Gaur, A. S. (2017). Business group affiliation and post-acquisition performance: An extended resource-based view. Journal of Business Research, 81(August), 21–30. https://doi.org/10.1016/j.jbusres.2017.08.003
Rabier, M. R. (2017). Acquisition motives and the distribution of acquisition performance. Strategic Management Journal, 38(13), 2666–2681. https://doi.org/10.1002/smj.2686
Raithel, S., & Schwaiger, M. (2015). The effects of corporate reputation perceptions of the general public on shareholder value. Strategic Management Journal, 36(6), 945–956. https://doi.org/10.1002/smj.2248
Renneboog, L., & Vansteenkiste, C. (2019). Failure and success in mergers and acquisitions. Journal of Corporate Finance, 58, 650–699. https://doi.org/10.1016/j.jcorpfin.2019.07.010
Rindova, V. P., Williamson, I. O., Petkova, A. P., & Sever, J. M. (2005). Being good or being known: An empirical examination of the dimensions, antecedents, and consequences of organizational reputation. Academy of Management Journal, 48(6), 1033–1049. https://doi.org/10.5465/amj.2005.19573108
Shen, R., Tang, Y., & Chen, G. (2014). When the role fits: How firm status differentials affect corporate takeovers. Strategic Management Journal, 35(13), 2012–2030. https://doi.org/10.1002/smj.2194
Stiebale, J., & Vencappa, D. (2018). Acquisitions, markups, efficiency, and product quality: Evidence from India. Journal of International Economics, 112, 70–87. https://doi.org/10.1016/j.jinteco.2018.02.005
Zavyalova, A., Pfarrer, M. D., Reger, R. K., & Hubbard, T. D. (2016). Reputation as a benefit and a burden? How stakeholders organizational identification affects the role of reputation following a negative event. Academy of Management Journal, 59(1), 253–276. https://doi.org/10.5465/amj.2013.0611
Baker, M., Pan, X., & Wurgler, J. (2012). The effect of reference point prices on mergers and acquisitions. Journal of Financial Economics, 106(1), 49–71. https://doi.org/10.1016/j.jfineco.2012.04.010
Barkema, H. G., & Schijven, M. (2008). How do firms learn to make acquisitions? A review of past research and an agenda for the future. Journal of Management, 34(3), 594–634. https://doi.org/10.1177/0149206308316968
Barney, J. B. (1991). Firm resources and sustained competitive advantage. Journal of Management, 17(1), 99–120. https://doi.org/10.1177/014920639101700108
Borghesi, R., Houston, J. F., & Naranjo, A. (2014). Corporate socially responsible investments: CEO altruism, reputation, and shareholder interests. Journal of Corporate Finance, 26, 164–181. https://doi.org/10.1016/j.jcorpfin.2014.03.008
Carmo, G. G. A. do, & Marcondes, R. C. (2016). Mergers and acquisitions with a focus on resources and organizational capabilities. Rebrae, 9(766), 26. https://doi.org/10.7213/rebrae.09.001.AO02
Cellier, A., & Chollet, P. (2016). The effects of social ratings on firm value. Research in International Business and Finance, 36, 656–683. https://doi.org/10.1016/j.ribaf.2015.05.001
Chalençon, L., Colovic, A., Lamotte, O., & Mayrhofer, U. (2017). Reputation, e-reputation, and value-creation of mergers and acquisitions. International Studies of Management and Organization, 47(1), 4–22. https://doi.org/10.1080/00208825.2017.1241086
Chatterjee, S. (1986). Types of synergy and economic value: The impact of acquisitions on merging and rival firms. Strategic Management Journal, 7(2), 119–139. https://doi.org/10.1002/smj.4250070203
Cho, S. Y., & Arthurs, J. D. (2018). The influence of alliance experience on acquisition premiums and post-acquisition performance. Journal of Business Research, 88(May 2017), 1–10. https://doi.org/10.1016/j.jbusres.2018.02.022
Chun, R., & Davies, G. (2010). The effect of merger on employee views of corporate reputation: Time and space dependent theory. Industrial Marketing Management, 39(5), 721–727. https://doi.org/10.1016/j.indmarman.2010.02.010
Cuypers, I. R. P., Cuypers, Y., & Martin, X. (2017). When the target may know better: Effects of experience and information asymmetries on value from mergers and acquisitions. Strategic Management Journal, 38(3), 609–625. https://doi.org/10.1002/smj.2502
Das, A., & Kapil, S. (2016). Determinants of acquisitions in Chinese technology firms: An empirical investigations. Asia-Pasific Journal of Business Administrations, 8(2), 127–142. https://doi.org/10.1108/APJBA-06-2013-0052
Davies, G., & Chun, R. (2004). A reputational perspective on mergers. Advances in Mergers and Acquisitions, 3, 131–148. https://doi.org/10.1016/S1479-361X(04)03006-6
Edi, E., & Cen, S. (2016). Analisis akuisisi terhadap keuangan perusahaan pengakuisisi dan diakuisisi terdaftar di bursa efek Indonesia. Jurnal Benefita, 1(3), 113–122. https://doi.org/10.22216/jbe.v1i3.1434
Edi, E., & Rusadi, S. (2017). Analisis Pengukuran Kinerja Keuangan Pasca Merger dan Akuisisi Pada Perusahaan yang Terdaftar di BEI. Jurnal Benefita, 2(3), 230–242. https://doi.org/10.22216/jbe.v2i3.1435
Edi, E., & Saputra, E. (2019). The effect of director experience on acquisition performance. Journal of Accounting Finance and Auditing Studies (JAFAS), 5(4), 136–150. https://doi.org/10.32602/jafas.2019.42
Erden, Z., Klang, D., Sydler, R., & von Krogh, G. (2015). “How can we signal the value of our knowledge?” Knowledge-based reputation and its impact on firm performance in science-based industries. Long Range Planning, 48(4), 252–264. https://doi.org/10.1016/j.lrp.2014.07.003
Faff, R., Prasadh, S., & Shams, S. (2019). Merger and acquisition research in the Asia-Pacific region: A review of the evidence and future directions. Research in International Business and Finance, 50(June), 267–278. https://doi.org/10.1016/j.ribaf.2019.06.002
Ferreira, M. P., Santos, J. C., Almeida, M. I. R. de, & Reis, N. R. (2014). Mergers & acquisitions research: A bibliometric study of top strategy and international business journals, 1980–2010. Journal of Business Research, 67(12), 2550–2558. https://doi.org/10.1016/j.jbusres.2014.03.015
Fombrun, C. J., & van Riel, C. B. M. (1997). The reputational landscape. Corporate Reputation Review, 1(1), 5–13. https://doi.org/10.1057/palgrave.crr.1540008
Fombrun, C., & Shanley, M. (1990). What’s in a name? Reputation building and corporate strategy. Academy of Management Journal, 33(2), 233–258. https://doi.org/10.2307/256324
Fong, C. M., & Lee, C. L. (2012). Reputation spillover effects and post-acquisition performance: a customer perspective. In Advances in Mergers and Acquisitions, Vol. 11 (pp. 139–154). Emerald Group Publishing Limited. https://doi.org/10.1108/S1479-361X(2012)0000011010
Gao, C., Zuzul, T., Jones, G., & Khanna, T. (2017). Overcoming Institutional voids: a reputation-based view of long-run survival. Strategic Management Journal, 38(11), 2147–2167. https://doi.org/10.1002/smj.2649
García-Meca, E., & Palacio, C. J. (2018). Board composition and firm reputation: The role of business experts, support specialists and community influentials. BRQ Business Research Quarterly, 21(2), 111–123. https://doi.org/10.1016/j.brq.2018.01.003
Gow, I. D., Wahid, A. S., & Yu, G. (2018). Managing reputation: Evidence from biographies of corporate directors. Journal of Accounting and Economics, 66(2–3), 448–469. https://doi.org/10.1016/j.jacceco.2018.08.009
Haleblian, J. J., Pfarrer, M. D., & Kiley, J. T. (2017). High-reputation firms and their differential acquisition behaviors. Strategic Management Journal, 38(11), 2237–2254. https://doi.org/10.1002/smj.2645
Haleblian, J., & Rajagopalan, N. (2011). The influence of acquisition experience and performance on acquisition behavior: evidence from the U.S. commercial banking industry. Academy of Management Journal, 49(2), 357–370. https://doi.org/10.5465/amj.2006.20786083
Kaur, A., & Singh, B. (2018). Measuring the immeasurable corporate reputation. Metamorphosis, 17(1), 53–64. https://doi.org/10.1177/0972622518778210
Lebedev, S., Peng, M. W., Xie, E., & Stevens, C. E. (2015). Mergers and acquisitions in and out of emerging economies. Journal of World Business, 50(4), 651–662. https://doi.org/10.1016/j.jwb.2014.09.003
McDonald, M. L., Westphal, J. D., & Graebner, M. E. (2008). What do they know? The effects of outside director acquisition experience on firm acquisition performance. Strategic Management Journal, 29(11), 1155–1177. https://doi.org/10.1002/smj.704
Mkrtchyan, A. (2013). The effect of director expertise on acquisition performance. SSRN Electronic Journal, 814–865. https://doi.org/10.2139/ssrn.2147169
Mulherin, J. H., Netter, J. M., & Poulsen, A. B. (2017). The evidence on mergers and acquisitions: a historical and modern report. In The handbook of the economics of corporate governance (1st ed.). Elsevier B.V. https://doi.org/10.1016/bs.hecg.2017.11.006
Musteen, M., Datta, D. K., & Kemmerer, B. (2010). Corporate reputation: Do board characteristics matter? British Journal of Management, 21(2), 498–510. https://doi.org/10.1111/j.1467-8551.2009.00676.x
Ogada, A., Njuguna, A., & Achoki, G. (2016). Effect of synergy on financial performance of merged financial institutions in Kenya. International Journal of Economics and Finance, 8(9), 199. https://doi.org/10.5539/ijef.v8n9p199
Ogunfowora, B. (2014). The impact of ethical leadership within the recruitment context: The roles of organizational reputation, applicant personality, and value congruence. Leadership Quarterly, 25(3), 528–543. https://doi.org/10.1016/j.leaqua.2013.11.013
Onakoya, O. A., Moses, C. L., Iyiola, O. O., Salau, O. P., & Ayoade, E. O. (2018). Dataset on ethical leadership and corporate reputation – Nigerian deposit money banks’ perspective. Data in Brief, 19, 847–852. https://doi.org/10.1016/j.dib.2018.05.094
Pfarrer, M. D., Pollock, T. G., & Rindova, V. P. (2010). A Tale of two assets: the effects of firm reputation and celebrity on earnings surprises and investors’ reactions. Academy of Management Journal, 53(5), 1131–1152. https://doi.org/10.5465/amj.2010.54533222
Popli, M., Ladkani, R. M., & Gaur, A. S. (2017). Business group affiliation and post-acquisition performance: An extended resource-based view. Journal of Business Research, 81(August), 21–30. https://doi.org/10.1016/j.jbusres.2017.08.003
Rabier, M. R. (2017). Acquisition motives and the distribution of acquisition performance. Strategic Management Journal, 38(13), 2666–2681. https://doi.org/10.1002/smj.2686
Raithel, S., & Schwaiger, M. (2015). The effects of corporate reputation perceptions of the general public on shareholder value. Strategic Management Journal, 36(6), 945–956. https://doi.org/10.1002/smj.2248
Renneboog, L., & Vansteenkiste, C. (2019). Failure and success in mergers and acquisitions. Journal of Corporate Finance, 58, 650–699. https://doi.org/10.1016/j.jcorpfin.2019.07.010
Rindova, V. P., Williamson, I. O., Petkova, A. P., & Sever, J. M. (2005). Being good or being known: An empirical examination of the dimensions, antecedents, and consequences of organizational reputation. Academy of Management Journal, 48(6), 1033–1049. https://doi.org/10.5465/amj.2005.19573108
Shen, R., Tang, Y., & Chen, G. (2014). When the role fits: How firm status differentials affect corporate takeovers. Strategic Management Journal, 35(13), 2012–2030. https://doi.org/10.1002/smj.2194
Stiebale, J., & Vencappa, D. (2018). Acquisitions, markups, efficiency, and product quality: Evidence from India. Journal of International Economics, 112, 70–87. https://doi.org/10.1016/j.jinteco.2018.02.005
Zavyalova, A., Pfarrer, M. D., Reger, R. K., & Hubbard, T. D. (2016). Reputation as a benefit and a burden? How stakeholders organizational identification affects the role of reputation following a negative event. Academy of Management Journal, 59(1), 253–276. https://doi.org/10.5465/amj.2013.0611