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CEO Preferences and Acquisitions

Dirk Jenter

London School of Economics; Stanford Graduate School of Business; National Bureau of Economic Research (NBER)

Katharina Lewellen

Tuck School of Business at Dartmouth

June 5, 2014

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.

Number of Pages in PDF File: 48

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

JEL Classification: G30, G34, D21, D23

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Date posted: December 8, 2011 ; Last revised: June 6, 2014

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

Contact Information

Dirk Jenter (Contact Author)
London School of Economics ( email )
Houghton Street
London, WC2A 2AE
United Kingdom
HOME PAGE: http://personal.lse.ac.uk/jenter/
Stanford Graduate School of Business ( email )
655 Knight Way
Stanford, CA 94305-5015
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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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