Do Target CEOs Trade Premiums for Personal Benefits?

49 Pages Posted: 18 Jan 2014 Last revised: 18 Feb 2014

See all articles by Buhui Qiu

Buhui Qiu

University of Sydney Business School; Financial Research Network (FIRN)

Svetoslav Trapkov

United Bulgarian Bank

Fadi Yakoub

Rabobank International, Netherlands

Date Written: January 14, 2014

Abstract

Using a sample of 2,198 completed M&A transactions between 1994 and 2010 in which both target and acquirer are public US firms supplemented with hand-collected data for target CEO retention, we uncover a significantly negative relation between target CEO retention and takeover premiums received by target shareholders. Further, when the target CEO was not retained, we document a significantly negative relation between the relative importance of the severance pay received by the target CEO and takeover premium. Taken together, our findings, which hold in various robustness tests, suggest that target CEOs bargain shareholder value for personal benefits during corporate takeovers. Our findings have important policy implications for takeover disclosures.

Keywords: CEO Retention, Severance Pay, Takeover Premium

JEL Classification: G34, J33

Suggested Citation

Qiu, Buhui and Trapkov, Svetoslav and Yakoub, Fadi, Do Target CEOs Trade Premiums for Personal Benefits? (January 14, 2014). Journal of Banking and Finance, Volume 42, May 2014, Pages 23–41., Available at SSRN: https://ssrn.com/abstract=2380270

Buhui Qiu (Contact Author)

University of Sydney Business School ( email )

Room 513, The Codrington Building
The University of Sydney
Sydney, NSW 2006
Australia
+61 2 9036 6435 (Phone)
+61 2 9351 6461 (Fax)

HOME PAGE: http://sydney.edu.au/business/staff/buhuiq

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

Svetoslav Trapkov

United Bulgarian Bank ( email )

5 Sveta Sofia Street
Sofia, 1040
Bulgaria

Fadi Yakoub

Rabobank International, Netherlands ( email )

Utrecht 3500 HG
Netherlands

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