When Target CEOs Contract with Acquirers: Evidence from Bank Mergers and Acquisitions
Elijah Brewer III
DePaul University - Department of Finance; Federal Reserve Bank of Chicago
William E. Jackson III
Culverhouse College of Commerce, University of Alabama; Federal Reserve Bank of Atlanta
Larry D. Wall
Federal Reserve Bank of Atlanta - Research Department
FRB of Atlanta Working Paper No. 2006-28
This paper investigates the impact of the target chief executive officer's (CEO) postmerger position on the purchase premium and target shareholders' abnormal returns around the announcement of the deal in a sample of bank mergers during the period 1990-2004. We find evidence that the target shareholders' returns are negatively related to the postmerger position of their CEO. However, these lower returns are not matched by higher returns to the acquirer's shareholders, suggesting little or no wealth transfers. Additionally, our evidence suggests that the target CEO becoming a senior officer of the combined firm does not boost the overall value of the merger transaction.
Number of Pages in PDF File: 39
Keywords: merger, acquisition, target CEO, corporate governance
JEL Classification: G34, K22, J33
Date posted: February 9, 2007
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