The impact of CEO characteristics on short-term M&A performance
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2024-07-01
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en
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Mergers and acquisitions (M&As) are complex corporate events that are characterized by a wide spread of short-term acquirer returns around the announcement day. CEOs play a key role in the process since they are responsible for the target selection, valuation, and integration. This study applies the upper echelons theory (UET), using CEO characteristics, to examine how CEOs affect short-term acquirers’ returns. These characteristics are age, tenure, education, prior CEO experience, and serial acquisition. The sample consists of 1,928 M&As initiated by US-based acquirers between 2014 and 2023. Using a multivariate OLS regression with clustered robust standard errors, this study finds that long-tenured CEOs generate significantly higher short-term acquirers’ returns compared to their short-tenured peers. This effect is the strongest when using the mean tenure instead of the median tenure as the cutoff point for long-tenured CEOs, but it only exists for a 5-day cumulative abnormal return (CAR). Furthermore, the results indicate that high-order acquisitions that are pursued by the same CEO (three or more within three years) lead to significant positive acquirers’ announcement day returns. Finally, the coefficients for age, education, and prior CEO experience do not suggest that these characteristics affect the short-term returns of acquirers.
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Faculteit der Managementwetenschappen