When Target CEOs Contract with Acquirers: Evidence from Bank Mergers and Acquisitions

FRB of Atlanta Working Paper No. 2006-28

39 Pages Posted: 9 Feb 2007

See all articles by Elijah Brewer

Elijah Brewer

DePaul University - Department of Finance; Federal Reserve Bank of Chicago

William E. Jackson

Culverhouse College of Business, University of Alabama

Larry D. Wall

Federal Reserve Bank of Atlanta - Research Department

Date Written: December 2006

Abstract

This paper investigates the impact of the target chief executive officer's (CEO) postmerger position on the purchase premium and target shareholders' abnormal returns around the announcement of the deal in a sample of bank mergers during the period 1990-2004. We find evidence that the target shareholders' returns are negatively related to the postmerger position of their CEO. However, these lower returns are not matched by higher returns to the acquirer's shareholders, suggesting little or no wealth transfers. Additionally, our evidence suggests that the target CEO becoming a senior officer of the combined firm does not boost the overall value of the merger transaction.

Keywords: merger, acquisition, target CEO, corporate governance

JEL Classification: G34, K22, J33

Suggested Citation

Brewer, Elijah and Jackson, William E. and Wall, Larry D., When Target CEOs Contract with Acquirers: Evidence from Bank Mergers and Acquisitions (December 2006). FRB of Atlanta Working Paper No. 2006-28, Available at SSRN: https://ssrn.com/abstract=958807 or http://dx.doi.org/10.2139/ssrn.958807

Elijah Brewer

DePaul University - Department of Finance ( email )

1 East Jackson Blvd.
Chicago, IL 60604-2287
United States

Federal Reserve Bank of Chicago ( email )

230 South LaSalle Street
Chicago, IL 60604
United States

William E. Jackson

Culverhouse College of Business, University of Alabama ( email )

Tuscaloosa, AL 35487-0225
United States
205.348.6217 (Phone)
205.348.6695 (Fax)

Larry D. Wall (Contact Author)

Federal Reserve Bank of Atlanta - Research Department ( email )

1000 Peachtree Street, NE
Atlanta, GA 30309-4470
United States
404-498-8937 (Phone)
404-498-8956 (Fax)

HOME PAGE: http://www.frbatlanta.org/econ_rd/bios/wall.htm

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