CEO cognitive complexity, acquisitions, and survival: Evidence from the recent financial crisis

The 2007-2008 financial crisis marked a significant macroeconomic event in the U.S. and across the globe. As the financial industry experienced significant consolidation during the crisis, many financial institutions failed to survive the crisis. This historical context provides a great opportunity to examine why and how some firms survive a major economic crisis while others do not. I propose that heterogeneity in organizational outcomes during a crisis may be attributed to firms’ different acquisition strategies during and prior to the crisis, which can be further attributed to their managerial differences, i.e., CEOs’ levels of cognitive complexity. A series of analyses of 463 financial firms and their CEOs suggests that CEOs’ cognitive complexity played a significant role in shaping their firms’ acquisition activities prior to the crisis (what I label the ‘precondition’), setting a strong ground for subsequent acquisitions during the crisis (a ‘snowball effect’), which eventually influenced their surv...