Testosterone In CEOs Influences M&A Deals: Study

09/16/2010 02:44 pm ET | Updated May 25, 2011

A CEO's testosterone level can determine his company's most major decisions, says a study by researchers at University of British Columbia's Sauder School of Business.

The report, published in Management Science and available through the Social Science Research Network (hat tip to Dealbreaker), argues that "young male" CEOs, defined as under 45 years old, are more likely than older men or women to both initiate and kill mergers and acquisitions deals. From that finding, the report concludes that testosterone, which young males contain in compartively high amounts, drives this behavior.

The researchers, Sauder professors Maurice Levi and Kai Li and PhD student Feng Zhang, found that these "high-testosterone types," as Levi called them in an interview with INFORMS, are four percent more likely to try to engage in mergers and acquisitions deals with another company. Additionally, these deals are 20 percent more likely to be dropped if one of the counterparties, particularly the buyer, is testosterone-rich.

Levi admitted that the research had some limitations. His team used data from Thomson SDC that goes back to 1973, doing analysis based on the CEO's age. Ideally, the paper says, the results would be based on saliva samples of the CEOs at the time, which would yield testosterone levels.

Instead, the scientists used age, considering factors like weight, exercise, smoking levels and caffeine intake, to determine the amounts of testosterone. "In retrospect we wish people had been swabbing the mouths of the proposers and responders whenever these things were occurring, but of course we can't do that," Levi said in the interview.

Why testosterone? Levi said his team ruled out other traits of youth, such as amount of experience and length of time on the job, because they didn't show a correlation to deal-making behavior.

To some extent, Levi said, these results are consistent with common sense. "Here we are talking about people who've reached their position because they want to be in a dominant role," he said. "They want to have power and control over resources and people." He recalled a conversation with a fishing buddy:

"You found that testosterone plays a role in that process?" Levi said the fishing buddy told him. "Did you think it would be otherwise?"

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