What S in it for Me? Ceos Whose Firms are Acquired

Abstract

We study benefits received by target company CEOs in completed mergers and acquisitions. These executives obtain wealth increases with a median of $4 to $5 million and a mean of $8 to $11 million, roughly in line with the permanent income streams that they sacrifice. CEOs receive lower financial gains from those transactions in which they become executives of the buyer, suggesting that tradeoffs exist between the financial and career-related benefits they extract. We find very high rates of turnover both at the time of the merger and, for those executives who stay, for several years post-merger. Regression estimates suggest that target shareholders receive lower acquisition premia in transactions that involve extraordinary personal treatment of the CEO.