September 14, 2010
CEO Behavior And Testosterone Levels

“High testosterone responders tend to reject low offers even though this is against their interest.”

HANOVER, MD, September 8, 2010 – High testosterone levels in CEOs negotiating mergers and acquisitions are linked to a higher rate of dropped deals and an increase in hostile takeover attempts, according to a new study in the September issue of Management Science, a journal of the Institute for Operations Research and the Management Sciences (INFORMS®).

Deal or No Deal: Hormones and the Mergers and Acquisitions Game” is by Maurice Levi, Kai Li, and Feng Zhang of the Sauder School of Business at the University of British Columbia. The study appears in the current issue of Management Science.

A podcast interview with Prof. Levi is at www.scienceofbetter.org/podcast/levi.html.

Although observers might expect M&A bids to follow analysis of business advantage, the authors find that more human factors are also at work.

“We find a strong association between male CEOs being young and their withdrawal rate of initiated M&As,” the authors say, characterizing these rejectionist younger executives as showing dominance-seeking behavior. “High testosterone responders tend to reject low offers even though this is against their interest.”

Younger CEOs are 4% more likely to initiate an attempt to acquire another company than older men, the study finds. In a more marked finding, male CEOs’ relative youth increases their likelihood of withdrawing a merger/acquisition bid by as much as 20%.

It strikes me that what is needed is the ability to raise and lower testosterone as differing business condiions require different optimal testosterone levels. Turn the knob up or down to adjust your personality and behavior as needed. 50 years from now I expect personality modification will become widespread.

Share |      Randall Parker, 2010 September 14 12:10 AM  Brain Sex Differences


Comments
Jake said at September 14, 2010 5:06 AM:

I have seen more lawyers kill deals by their behavior than CEOs. In fact, I had the most success by keeping lawyers out of the deal meeting until the very end. And yes if the lawyers were from big firms, they did show all the symptoms of excess testosterone.

Big D said at September 14, 2010 5:33 AM:

New Study: Male big toe is 32% more likely to feel an increase in pain when hit with a sledge hammer as compared to a big toe that is hit with a placebo.

kenh said at September 14, 2010 11:18 AM:

That 4% number just jumps out and screams "ignore".
Even the 20%...

Sione said at September 14, 2010 11:21 AM:

There is a problem with this, "what is needed is the ability to raise and lower testosterone as differing business condiions require different optimal testosterone levels. Turn the knob up or down to adjust your personality and behavior as needed."

Consider, "Younger CEOs are 4% more likely to raise their testosterone levles in an attempt to modify personality during company M&As than older men. Their relative youth increases their likelihood of medicating to the point where they withdraw from a merger/acquisition bid by as much as 20%."

It's a regression. Nothing changes!

Better to stay off the drugs.

Sione

Placebo said at September 15, 2010 9:50 AM:

Did the study actually measure testosterone levels in these CEOs?
It doesn't appear so ... "In the current paper, age is used as a proxy for testosterone"
It appears they just ASSUME that these CEOs, because they were young and male, had high testosterone levels. Perhaps they should compare aged matched male and female CEOs and measure testosterone levels (via oral swab??)
Also, what is the statistical significance of a 2% change?
This study seems like shady science.

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