Executive Gender and Overconfidence: The Effect on Mergers and Acquisitions

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Existing research documents significant gender and overconfidence effects in the merger and acquisition (M&A) decisions of firms. Namely, firms with female leadership tend to be less acquisitive, while firms with overconfident executives are more acquisitive. What is less clear is how these personal characteristics interact. To understand the underlying dynamics, I examine the interplay between these two effects. I find that non-overconfident female executives drive the negative gender effect on M&A activity. By contrast, overconfident female executives behave similarly to non-overconfident male executives. This suggests that when studying how executive characteristics affect corporate decision-making, we need a more holistic approach: Gender is not simply a proxy for overconfidence and both gender and behavioral characteristics of the executive must be considered.