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CEO Preferences and Acquisitions

Dirk Jenter

London School of Economics; National Bureau of Economic Research (NBER); CEPR

Katharina Lewellen

Tuck School of Business at Dartmouth

June 5, 2014

Rock Center for Corporate Governance at Stanford University Working Paper No. 105
Journal of Finance, Forthcoming

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

JEL Classification: G32, G34, G35

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Date posted: December 8, 2011 ; Last revised: June 25, 2014

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

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