The Impact of CEO Overconfidence on M&A Performance in US: A Textual Analysis

The topic of understanding the CEO’s behavioral factors impact on investments, particularly M&A deals, raised the high interest in researchers starting from the second half of the 2000s. Generally, CEO overconfidence tends to destroy the value of the company as a result of a merger and acquisition deal. In contrast to the existing literature, this paper uses textual analysis as a way of analyzing CEO behavior and factors that affect his/her speech tone. Besides that, a new approach of CEO’s speech tone analysis helps to identify the factors that force CEOs to construct their speech during the quarterly earnings calls in a similar manner. The sample of the research consists of 492 M&A deals by US firms implemented during between 2009 and 2019. The main findings of this research paper are the following: 1) overconfident CEOs tend to negatively impact the to the M&A performance of the firm; 2) CEOs’ speech tone is not solely attributed to the industry-specific factors; 3) CEO overconfidence does not impact the M&A performance in the case of high-tech company target deals. Keywords: CEO overconfidence, merger and acquisition deal, textual analysis, speech tone