CEO Turnover after Acquisitions: Are Bad Bidders Fired?

69 Pages Posted: 12 Jun 2006 Last revised: 15 Jun 2013

See all articles by Kenneth Lehn

Kenneth Lehn

University of Pittsburgh - Finance Group

Mengxin Zhao

Securities and Exchange Commission (SEC)

Date Written: 2006

Abstract

We examine the relation between bidder returns and the probability of 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 five 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.

Keywords: CEO, Turnover, Acquisition, Governance, and Control

JEL Classification: G34

Suggested Citation

Lehn, Kenneth and Zhao, Mengxin, CEO Turnover after Acquisitions: Are Bad Bidders Fired? (2006). Journal of Finance, August 2006; AFA 2004 San Diego Meetings. Available at SSRN: https://ssrn.com/abstract=444360 or http://dx.doi.org/10.2139/ssrn.444360

Kenneth Lehn (Contact Author)

University of Pittsburgh - Finance Group ( email )

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

Mengxin Zhao

Securities and Exchange Commission (SEC) ( email )

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

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