New research from Rotman reveals that CEOs who have moved away from their home country are significantly more likely to make international acquisitions, often targeting companies in their birth country or in countries that once colonized it.

“Foreign-born CEOs are taking an increasing leadership role in the corporate world,” the researchers note. “In our sample, 24% of the acquiring companies have foreign-born CEOs.”

Corporate acquisitions

The study analyzed nearly 1,300 corporate acquisitions over 14 years, comparing acquisition data with biographical information on the CEOs at the time of the purchases.

Foreign-born CEOs were 43% more likely than domestic-born ones to acquire companies across borders, often in their birth countries. When considering all potential international targets, the researchers found that foreign-born CEOs were 17 times more likely to pursue acquisitions in their original country compared to other international targets.

This tendency is attributed to the CEO’s familiarity with their birth country and local connections, as well as a desire to “give back” to their place of origin.

Helping the birth country

The inclination to help their birth country can extend to acquisitions in countries that once colonized their homeland. For example, an Indian-born CEO might acquire a company in the United Kingdom, or a Greek-born CEO might seek a target in Turkey. The study found that foreign-born CEOs were more than twice as likely to make an acquisition in a former colonizing country than in any other international target.

“The idea is that if a CEO wants to bring pride to the birth country, she would acquire targets in the country that colonized it in the past,” the authors explain.

How do companies fare when their CEOs acquire targets in their birth country? The acquiring company’s shareholders see a 1.3% excess return on these acquisitions, while shareholders of the target company enjoy a 2.9% excess premium.

This tendency should not deter the hiring of foreign-born CEOs. Rather, it’s an aspect that a company’s board should be aware of. If a CEO proposes an acquisition in their birth country, the board should scrutinize the proposal carefully.

“In many cases, these acquisitions will benefit the acquiring firm,” the authors conclude, “but not always.”