CEO Turnover after Acquisitions: Are Bad Bidders Fired?

Posted: 26 May 2013 Last revised: 4 Feb 2017

See all articles by Kenneth Lehn

Kenneth Lehn

University of Pittsburgh - Finance Group

Mengxin Zhao

Securities and Exchange Commission (SEC)

Date Written: August 24, 2005

Abstract

We examine the relation between bidder returns and the probability of chief executive officer (CEO) turnover in acquiring firms. Using a sample of 714 acquisitions during 1990 to 1998, we find that 47% of CEOs of acquiring firms are replaced within 5 years, including 27% by internal governance, 16% by takeovers, and 4% by bankruptcy. A significant inverse relation exists between bidder returns and the likelihood of CEO turnover. This relation is not associated with governance structure. It also is not significantly different in stock versus cash acquisitions, which appears to be inconsistent with Shleifer and Vishny's theory of “stock market driven” acquisitions.

Suggested Citation

Lehn, Kenneth and Zhao, Mengxin, CEO Turnover after Acquisitions: Are Bad Bidders Fired? (August 24, 2005). Journal of Finance, Vol. 61, No. 4, 2006, Available at SSRN: https://ssrn.com/abstract=2269876

Kenneth Lehn

University of Pittsburgh - Finance Group ( email )

372 Mervis Hall
Pittsburgh, PA 15260
United States
412-648-2034 (Phone)

Mengxin Zhao (Contact Author)

Securities and Exchange Commission (SEC) ( email )

450 Fifth Street, NW
Washington, DC 20549-1105
United States

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