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The Disturbing Relationship between Corporate Mergers and the Size of the CEO's Ego

Investors and employees often complain that some mergers and acquisitions are driven more by ego than any business advantages. Now evidence from two French business schools suggests there's quite a bit of truth to that sentiment.

A team of three researchers analyzed mergers between U.S. listed companies and found that mergers and acquisitions are more likely to be initiated, and more likely to be completed quickly, by highly-narcissistic CEOs.

Nihat Aktas, of EMLYON Business School, and Eric de Bodt and Helen Bollaert, each of the Universite Lille Nord de France, analyzed 1,700 transcripts of CEO interviews with analysts and journalists before and during 146 acquisitions to determine how narcissistic each CEO was. They tallied how often each CEO used first person singular pronouns such as "I," "me," and "my" and compared thatn to the frequency of first person plural pronouns such as "we," "us," and "our." In all, they looked at 146 mergers and acquisitions between 2002 and 2006. The average size of the target firm was $2.9 billion.

Ego matters--A Lot

  • CEOs who initiated deals were found to be significantly more narcissistic than those of target companies.
  • Narcissistic CEOs are more likely to initiate mergers and acquisitions
  • Compared to CEOs who are less self-centered, narcissistic CEOs negotiate faster before the deal becomes public. Poor-quality corporate governance was also associated with fast negotiations, suggesting that companies with poor governance aren't able to rein in CEOs with inflated egos.
  • Narcissistic CEOs are more likely to complete transactions
  • Narcissistic CEOs do not get better deal prices than others.
As for the CEO of the target company:
  • The more self-centered the target company CEO was, the higher the bid premium he or she was able to get for the company.
  • If the CEO of the target company is highly narcissistic, it's less likely that the acquiring company will make abnormally high returns on the deal.
The researchers suggest that the very definition of narcissism provides much of the explanation for their findings.
  • Narcissists must "continuously undertake actions which reinforce their self-image and maintain their ideal ego," and one way for a CEO to do this would be to acquire another company
  • Narcissists also, the paper states, "are manipulative and lack empathy." Those might not be admirable traits, but it's easy to see how they could come in handy during merger negotiations.
The researchers did not publish the narcissism scores for individual CEOs. Who do you think would have scored highest? How would your CEO fare? And is that a good thing or a bad thing?

Photo courtesy flickr user jcoterhals
Kimberly Weisul is a freelance editor and writer. Follow her at

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