Overconfident CEOs Delegate Less in Mergers ^{CEFR B1}

The study examines whether overconfident chief executive officers are less willing to delegate important tasks. The research is relevant because many firms operate across countries and sectors, and complex mergers often require input from different experts. Jared Smith, a coauthor and professor of finance, says delegation can bring more voices to the table and free CEOs to focus on broader issues.

The researchers studied 3,690 mergers and acquisitions by publicly traded companies between 2000 and 2019. They included only transactions valued at least $50 million that were at least 1% of the acquiring company's equity; the deals involved 1,634 CEOs. To measure CEO confidence the team used an established technique based on executives' use of stock options. To measure delegation they reviewed press releases, news articles and the SEC "background of the merger" documents to see who attended meetings.

They found that 41% of the CEOs were judged overconfident and that overconfident CEOs were about 10–15% less likely to delegate responsibility during M&As. The tendency not to delegate was stronger when a deal involved an industry new to the buyer and when the buyer had more business segments. The paper appears in the Journal of Management Studies; coauthors are from Indiana University and Clemson University.