ABSTRACT This study investigates how acquisition frequency influences acquirer risk and how this relationship is moderated by managerial wealth vested in the firm. Drawing on the behavioural agency model, we argue that managers use frequent acquisitions to reduce firm‐specific risk exposure when their personal wealth is significantly tied to firm performance. Using a panel of U.S. firms, we employ multiple empirical strategies—including probit models, recursive bivariate probit, and semi‐parametric estimation—to examine the association between acquisition frequency, managerial wealth, and two measures of acquirer risk: asset return volatility and cash flow volatility. Frequent acquirers are significantly less risky than non‐frequent acquirers, and the relationship between managerial wealth and risk is inverted U‐shaped among frequent acquirers, but not among infrequent acquirers. These findings suggest that executives with high levels of vested wealth initially tolerate more risk but later prioritise diversification to protect their holdings. This study offers novel insights by integrating behavioural agency theory with empirical acquisition strategy and firm risk models. It contributes theoretically by demonstrating that frequent acquisitions serve as managerial risk‐management tools and empirically by identifying nonlinear effects of managerial wealth on acquisition behaviour and risk outcomes.
Chandra S. Mishra (Mon,) studied this question.