The effect of educational background of CEOs on merger
and acquisition performance during 2012 to 2017: Evidence
from China.

education教育论文代写 For example, Yim (2010) claims that the age of CEOs is positively related to merger and acquisition performance.

1. Introduction

As a kind of major investment activity in the financial field of a firm with numerous participants from diversified institution individual, merger and acquisition raise huge attention of academic world. According to the M&A 2016 review and 2017 outlook report by PwC China, China capital market, as one of the most attractive market in the world, there are 11,409 merger and acquisition activities completed in 2016, which is increase by 21%. The deal value increase by 11% to $7,70 billion.

Under this capital environment, it is meaningful to conduct study on this topic. Besides, Chief Executive Officer (CEO), as the highest leader in charge of the management in a firm, plays a significant role in merger and acquisition. In China, the education background of CEOs is diversified. Some CEOs who graduate from high school before the restoration of the of the Chinese National College Entrance Examination System even have no access to higher education. However, with Chinese economics reform, it is common that some young CEOs gain some oversea education experience. Therefore, the purpose of this study is to figure out how the educational background of CEOs affect merger and acquisition performance in China capital market.

2. Literature review  education教育论文代写

2.1Literatures related tobackground

The studies related to examine the effect of educational background of CEOs on acquisition is rare. However, a number of studies concentrated on investigating the relations between the educational background of CEOs with the firm performance and corporate strategy which can indirectly provide theoretical support for this study. According to the research by Wemerfelt (1984) and Van der Sluis, Van Praag and Vijverberg (2004), the educational background of CEOs is positively related to the firm performance. Well educated CEOs brings firm more return in long term. Besides, they can bring firm more profit, and they are more loyal to firm. (Gimeno, Folta, Cooper & Woo, 1997). The higher level of education management teams has, the more efficient in managing strategic resources (Pesels & Yan, 2000).

Here is a brief view of relative literatures that investigate how the different dimensions of education background of CEOs affect firm performance and corporate strategy. Firstly, CEOs with higher degree might have good ability on analysing information and making innovation which make contributions on enhancing the core competitiveness of a company the reaction speed of market. CEOs with higher degree can use more complex financial model to analyse the financial situation of a firm. (Graham & Harvey, 2002) The cognitive ability and skills of CEOs is positively related to their educational level.  education教育论文代写

Higher level of cognitive ability help CEOs quickly set up accurate and appropriate corporate decisions in fiercely competitive circumstances (Wiersema and Bantel, 1992). Moreover, Güner, Malmendier and Tate (2008) proposes that the CEOs with business education background, the firm they work for gains more opportunities to enter capital market. They are more active in corporate financial policies and with a better interaction in the capital market (Custódio, 2013). Furthermore, CEOs with overseas education background is positively related to firm performance (Carpenter, 2001). Based on the studies on multicultural corporations in U.S.A, CEOs with oversea education background can have positive effects on the globalization of the corporation.

Sambharya (1996). CEOs with overseas education background have more ambitions on international cooperation for quickly gaining global market so that which can implicitly bring positive performance to the firm.

In addition, there are some studies claims the educational background of CEOs is negatively related to the firm performance. See studies from Daily (2000), the education background of CEOs is negatively related to Jensen’s alpha, and no significant association with other indicator of firm performance. CEOs graduated from non-elite universities have better performance than who graduated from elite universities.

(Gottesman & Morey, 2006). The knowledge from book is quite different from the practical management skill. CEOs with well education background do not mean they can be a successful entrepreneur. It is questionable how much help the knowledge learnt from university really have in real business environment. (Jalbert, 2002)

Many studies analyse the effects of some other characteristics of CEOs on the acquisition performance. Hambrick and Mason (1984) who raise the “Upper Echelons Theory” claims that corporate strategy is a complicated progress influenced by many factors, the most important one among them is the characteristics of CEOs, which directly related to the decision making in operation of the firm, such merger and acquisition activities.  education教育论文代写

For example, Yim (2010) claims that the age of CEOs is positively related to merger and acquisition performance. To some content, age reflects the personal and working experience of CEOs that can affect the merger and acquisition performance. The younger the CEOs are, the more obvious intention they have, which can improve the possibility of the success on merger and acquisition activities. Besides, female CEOs are more conservative on corporate decision than male CEOs. So, the gender of CEOs also has effect on merger and acquisition. (Facciio, 2012) Furthermore, the larger the firm is, the more possible it will attract future investment so that firm size can affect merger and acquisition (Orlitzkyv, 2001)

2.2 Literatures related to methodology

Education as a key indicator to reflect CEO’s knowledge, professional skills and innovation abilities. Here are several methods to evaluate it. Gottesman and Morey (2006) take all listed firms whose CEOs with undergraduate degree or above on the New York Stock Exchange during 2000 to 2003 as example and use the SAT scores to measure the level of CEO’s education. For measuring the merger and acquisition performance, Lehn and Zhao (2016) use the data before and after 2 trading days as the small windows to calculate the cumulative abnormal return (CAR) to measure the merger and acquisition performance.

Higson and Elliott (1998) use the 830 completed merger and acquisition cases in UK as sample by using the he buy-and-hold  abnormal return (BHAR) as the indicator to evaluate it. Bedsides, the performance can also be measured by return on equity (ROE), return on investment (ROI), and Jensen’s alpha. (Daily, 2000) Besides, the performance can also be measured by earnings before interest, taxes, depreciation and amortization (EBITDA) divided by total asset (Bevan, A.A. a& Danbolt, 2004).


3. Research aim and contributions  education教育论文代写

This study examines the relations between the educational background of CEOs with merger and acquisition performance in China during 2007 and 2017. Although this study is based on China capital market, it also has contributions on the analysis of further studies on other countries. Moreover, this study will extend the research area of the merger and acquisition. from the perspective of the main role in merger and acquisition, which is CEO’s education background, we use empirical analysis to verify its influence on merger and acquisition performance, so the perspective of this paper is unique and novel.

Furthermore, most of studies also examine how the characteristics of CEOs impact on merger and acquisition performance, but they are more concentrated on CEO’s over confidence, gender, age, compensation and so on. Research related to observer the link between the education background of CEOs in merger and acquisition is rare so that this study will enrich this field.

4. Research methodology and method


This study will use the data from CSMAR (China Stock Market & Accounting Research) database system. Our research period is from Beginning January 1, 2012 to ending December 31, 2017. The data of merger and acquisition activities is mainly based on Wind and complemented by CSMAR. Meanwhile, the missing information will be obtained from company’s financial annual report, official website or other related public information. After these ways, the company that still have difficulty on collection the educational information of CEOs will be excluded from the samples.

4.2 Measuring the merger and acquisition performance

This study will examine the merger and acquisition performance by conducting the Event Studies. Based on a corporate event, event studies examine the effect of this identifiable event on firm’s stock price (Kothari and Warner, 2007). Then, we use the fluctuation on stock price before and after the merger and acquisition activities to value the performance of merger and acquisition. So, we will analyse the cumulative abnormal return (CAR) of the acquirer firm in each M&A case.



4.3 Measuring the merger and acquisition performance  education教育论文代写

According to the studies by Graham and Harvey (2002), Güner, Malmendier and Tate (2008), and Carpenter (2001), we will evaluate the educational background of CEOs from the side of high degree, business educational background and oversea education background. High degree means CEO with bachelor’s degree or above. According to the subjects of CEOs, business background includes subjects like Economics, Accounting, Finance, Management, Human Resource and some other similar subjects. CEO who has over one-year study in any other countries will be consider with oversea education background in this study, We set up all these three variables as dummy variables: Higher degree (Edu), Business educational background (Biz) and Oversea educational background (Oversea).

  1. High degree (Edu)

CEO with high degree = 1, CEOs with other degree=0.

  1. Business educational background (Biz)

CEO with business background = 1, CEOs other background = 0.

  1. Oversea education background(Oversea)

CEO with oversea education background = 1, CEO with domestic education background = 0

4.4 Measuring the control variables

In order to reduce the bias of out studies, based research on Yim (2010), Facciio (2012) and Orlitzkyv (2001), we introduce gender (Gen), age (Age) and firm size (Size) as control variables. Therefore, we set up gender (Gen) as dummy variable to identify the gender of CEOs. The age (Age) of CEOs is natural variable. For measuring the firm size, we take logarithm of the total asset of the firm to evaluate it.

  1. Gender (Gen)

Male CEO = 1, female CEO = 0

  1. Age(Age)

The age of CEO on the day of the announcement of merger and acquisition activities.

  1. Firm size(Ln_Size)

The logarithm of the total asset of the firm.  education教育论文代写

Table: Summary of all variables

Variable Type Name Symbol
Dependent variables Cumulative abnormal return CAR
Independent variables Degree Edu
CEO’s business education



CEO’s oversea education



Control variables CEO’s gender Gen
CEO’s age Age
Firm size Ln_Size

4.5 Research hypotheses education教育论文代写

Hypothesis 1: The merger and acquisition performance of firms is positively related to the CEOs with higher degree.

Hypothesis 2: The merger and acquisition performance of firms is positively related to the CEOs with business education experience.

Hypothesis 3: The merger and acquisition performance of firms is positively related to the CEOs with oversea education experience.

4.6 Regression model

This study will analyse the above three hypotheses on by using panel data regression. For hypothesis 1,

5. Expected findings and potential implication

In sum, this paper will use the evidence from China capital market to conduct the investigation of link between educational background of CEOs and merger and acquisition performance during 2012 to 2017. It is expected that this study could obtain more efficient and valid evidences to support the research field of merger and acquisition performance in China Market. Meanwhile, we hope this study can fill the blank in analysis of merger and acquisition on educational background of CEOs thereby provide theoretical ideas on how the firms select the CEOs based on educational background.


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Carpenter, M.A. and Westphal, J.D., 2001. The strategic context of external network ties: Examining the impact of director appointments on board involvement in strategic decision making. Academy of Management journal, 44(4), pp.639-660.  education教育论文代写

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