Get access

CEO Turnover after Acquisitions: Are Bad Bidders Fired?




    Search for more papers by this author
    • Kenneth M. Lehn is with the Joseph M. Katz Graduate School of Business, University of Pittsburgh; Mengxin Zhao is with the McCallum Graduate School of Business, Bentley College. We thank David Becher, Rabikar Chatterjee, Harry DeAngelo, Linda DeAngelo, Shane Johnson, Steven Kaplan, Gershon Mandelker, Kevin Murphy, Micah Officer, Annette Poulsen, Robert Stambaugh (the editor), Shawn Thomas, Karen Wruck, and especially an anonymous referee for their insightful comments and suggestions. We also want to thank participants at the 2004 American Finance Association Meeting and workshop participants at the University of Southern California for helpful comments. We thank Sabri Guray Uner for excellent research assistance.


We examine the relation between bidder returns and the probability of chief executive officer (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 5 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.