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CEO Preferences and Acquisitions

48 Pages Posted: 8 Dec 2011 Last revised: 6 Jun 2014

Dirk Jenter

London School of Economics & Political Science (LSE) - Department of Finance; Centre for Economic Policy Research (CEPR)

Katharina Lewellen

Tuck School of Business at Dartmouth

Multiple version iconThere are 5 versions of this paper

Date Written: June 5, 2014

Abstract

This paper explores the impact of target CEOs’ retirement preferences on takeovers. Using retirement age as proxy for CEOs’ private merger costs, we find strong evidence that target CEOs’ preferences affect merger activity. The likelihood of receiving a successful takeover bid is sharply higher when target CEOs are close to age 65. Takeover premiums and target announcement returns are similar for retirement-age and younger CEOs, implying that retirement-age CEOs increase firm sales without sacrificing premiums. Better corporate governance is associated with more acquisitions of firms led by young CEOs, and with a smaller increase in deals at retirement age.

Keywords: Mergers & Acquisitions, CEO preferences, Principal-Agent Problems

JEL Classification: G30, G34, D21, D23

Suggested Citation

Jenter, Dirk and Lewellen, Katharina, CEO Preferences and Acquisitions (June 5, 2014). Available at SSRN: https://ssrn.com/abstract=1969177 or http://dx.doi.org/10.2139/ssrn.1969177

Dirk Jenter (Contact Author)

London School of Economics & Political Science (LSE) - Department of Finance ( email )

United Kingdom

HOME PAGE: http://personal.lse.ac.uk/jenter/

Centre for Economic Policy Research (CEPR) ( email )

77 Bastwick Street
London, EC1V 3PZ
United Kingdom

Katharina Lewellen

Tuck School of Business at Dartmouth ( email )

Hanover, NH 03755
United States
603-646-8247 (Phone)

HOME PAGE: http://oracle-www.dartmouth.edu/dart/groucho/tuck_faculty_and_research.faculty_profile?p_id=QE2X25

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