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CEO Preferences and Acquisitions

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

Dirk Jenter

London School of Economics & Political Science; Center for Economic Policy Research (CEPR)

Katharina Lewellen

Tuck School of Business at Dartmouth

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Date Written: 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.

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

JEL Classification: G32, G34, G35

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: or

Dirk Jenter (Contact Author)

London School of Economics & Political Science ( email )

Houghton Street
London, WC2A 2AE
United Kingdom


Center 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)


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