University of Pittsburgh – Finance Group
University of Alberta – School of Business; University of Alberta – Department of Finance and Statistical Analysis; University of Alberta
Journal of Finance, August 2006
AFA 2004 San Diego Meetings
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.