EconPapers    
Economics at your fingertips  
 

CEO Preferences and Acquisitions

Dirk Jenter () and Katharina Lewellen
Additional contact information
Katharina Lewellen: Dartmouth College

Research Papers from Stanford University, Graduate School of Business

Abstract: 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.

Date: 2011-12
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (11) Track citations by RSS feed

Downloads: (external link)
http://gsbapps.stanford.edu/researchpapers/library/RP2089.pdf

Related works:
Journal Article: CEO Preferences and Acquisitions (2015) Downloads
Working Paper: CEO Preferences and Acquisitions (2011) Downloads
Working Paper: CEO Preferences and Acquisitions (2011) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecl:stabus:2089

Access Statistics for this paper

More papers in Research Papers from Stanford University, Graduate School of Business Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2020-07-03
Handle: RePEc:ecl:stabus:2089