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Researchers have long been interested in understanding the motives behind CEOs’ actions. On the one hand, CEOs may pursue strategic actions because they are confident they will enhance firm value. Alternatively, CEOs may take actions even when they have low confidence in the value of those actions, perhaps driven by self-interest or social pressures. Although research suggests that CEO option exercises following an acquisition announcement are an ex post behavioral outcome of low CEO confidence in the acquisition’s value-creation potential, prior research has not identified any ex ante signals shareholders can look for to assess acquiring CEOs’ confidence when the acquisition is announced. We address this concern by exploring a potential early warning signal of low CEO confidence: impression offsetting. We theorize that impression offsetting—measured as other unrelated positive announcements made by the firm in the days immediately surrounding the acquisition announcement—may serve as an ex ante signal of low CEO confidence in the acquisition’s value-creation potential, and, as such, will be positively associated with CEO option exercises, an ex post behavioral outcome of low confidence. We test our theory with a sample of 491 large acquisitions and find consistent support for our hypotheses.
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