Journal article
Executive Careers and Compensation Surrounding Takeover Bids
The Journal of finance (New York), v 49(3), pp 985-1014
Jul 1994
Abstract
This article examines the impact of a takeover bid on the careers and compensation of chief executives of target firms. We find that acquisition attempts occur more frequently in industries where chief executive officers (CEO) have positive abnormal compensation. Target CEOs are more likely to be replaced when a bid succeeds, than when it fails. CEOs of target firms who lose their jobs generally fail to find another senior executive position in any public corporation within three years after the bid. Consistent with Fama's (1980) notion of "ex post settling up", postbid compensation changes of managers retained after an acquisition attempt are negatively related to several measures of their prebid abnormal compensation. This result is robust to a variety of specifications and does not seem to be caused by mean reversion or selection bias. These findings are consistent with the hypothesis that a takeover bid generates additional information that is used by labor markets to discipline managers.
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121 citations in Scopus
Details
- Title
- Executive Careers and Compensation Surrounding Takeover Bids
- Creators
- Anup AgrawalRalph A. Walkling - American Finance Association
- Publication Details
- The Journal of finance (New York), v 49(3), pp 985-1014
- Publisher
- American Finance Association
- Resource Type
- Journal article
- Language
- English
- Academic Unit
- Finance
- Scopus ID
- 2-s2.0-84993918483
- Other Identifier
- 991021881496604721