The Death of the Deal: Are Withdrawn Acquisition Deals Informative of CEO Quality?

66 Pages Posted: 19 Mar 2012 Last revised: 29 Aug 2017

See all articles by Stacey E. Jacobsen

Stacey E. Jacobsen

Southern Methodist University (SMU) - Finance Department

Date Written: May 21, 2014

Abstract

To examine the market response to positive revelations of chief executive officer (CEO) quality, this study focuses on CEOs who withdraw acquisition bids when the price becomes increasingly expensive. Firms that withdrawal for price-related reasons earn higher withdrawal returns than firms that withdraw for other reasons. This relation is stronger when CEO uncertainty and discretion is high. CEOs unwilling to increase the offer price are less likely to be replaced and more likely to advance to a larger firm than a control group of CEOs. The finding that the market attaches value to CEO-specific information suggests that unobservable manager characteristics can meaningfully impact firm outcomes.

Keywords: Withdrawn mergers and acquisitions, CEO quality, Manager characteristics, CEO skill, Private benefits, Overconfidence, Monitoring, Turnover

JEL Classification: G14, G30, G34, M51

Suggested Citation

Jacobsen, Stacey E., The Death of the Deal: Are Withdrawn Acquisition Deals Informative of CEO Quality? (May 21, 2014). Journal of Financial Economics (JFE), Vol. 114, 2014. Available at SSRN: https://ssrn.com/abstract=2024229 or http://dx.doi.org/10.2139/ssrn.2024229

Stacey E. Jacobsen (Contact Author)

Southern Methodist University (SMU) - Finance Department ( email )

United States

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