CEO Preferences and Acquisitions

43 Pages Posted: 17 Dec 2011 Last revised: 7 Apr 2022

See all articles by Dirk Jenter

Dirk Jenter

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

Katharina Lewellen

Dartmouth College - Tuck School of Business

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Date Written: December 2011


This paper explores the impact of target CEOs' retirement preferences on the incidence, the pricing, and the outcomes of takeover bids. Mergers frequently force target CEOs to retire early, and CEOs' private merger costs are the forgone benefits of staying employed until the planned retirement date. Using retirement age as an instrument for CEOs' private merger costs, we find strong evidence that target CEO preferences affect merger patterns. The likelihood of receiving a takeover bid increases sharply when target CEOs reach age 65. The probability of a bid is close to 4% per year for target CEOs below age 65 but increases to 6% for the retirement-age group, a 50% increase in the odds of receiving a bid. This increase in takeover activity appears discretely at the age-65 threshold, with no gradual increase as CEOs approach retirement age. Moreover, observed takeover premiums and target announcement returns are significantly lower when target CEOs are older than 65, reinforcing the conclusion that retirement-age CEOs are more willing to accept takeover offers. These results suggest that the preferences of target CEOs have first-order effects on both bidder and target behavior.

Suggested Citation

Jenter, Dirk and Lewellen, Katharina, CEO Preferences and Acquisitions (December 2011). NBER Working Paper No. w17663, Available at SSRN:

Dirk Jenter (Contact Author)

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

United Kingdom


Centre for Economic Policy Research (CEPR) ( email )

United Kingdom

Katharina Lewellen

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

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