CEO Preferences and Acquisitions

Jenter, Dirk; Lewellen, Katharina

doi:10.2139/ssrn.1969619

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CEO Preferences and Acquisitions

Rock Center for Corporate Governance at Stanford University Working Paper No. 105

Journal of Finance, Forthcoming

48 Pages Posted: 8 Dec 2011 Last revised: 25 Jun 2014

See all articles by Dirk Jenter

Dirk Jenter

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

Katharina Lewellen

Dartmouth College - Tuck School of Business

There 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: takeover bids, CEO retirement preferences and acquisitions, CEO early retirement on merger

JEL Classification: G32, G34, G35

Suggested Citation: Suggested Citation

Jenter, Dirk and Lewellen, Katharina, CEO Preferences and Acquisitions (June 5, 2014). Rock Center for Corporate Governance at Stanford University Working Paper No. 105, Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1969619 or http://dx.doi.org/10.2139/ssrn.1969619