Does CEO Acquisition-Selectivity Skill Matter to Firm Value?
56 Pages Posted: 1 Nov 2018
Date Written: October 27, 2018
This paper investigates whether and how CEO acquisition-selectivity skill differences have significant cross-sectional effects on firm value. We document that CEO acquisition-selectivity skill and firm performance are diverse in the cross-section of acquiring firms. CEOs with low acquisition-selectivity skill, about 49% of our sampled deals, experienced significant negative abnormal returns. On the contrary, CEOs with exceptional acquisition-selectivity skill (20%) created not only the highest abnormal returns by carrying out positive NPV acquisitions but also significantly raised the long-term efficiency gains of acquiring firms. Our results are robust to several endogeneity concerns including an analysis of exogenous CEO departures to other firms and CEO sudden deaths.
Keywords: CEO acquisition selectivity skill, corporate takeovers, abnormal returns, post-merger efficiency gains, investment (in)efficiency
JEL Classification: G14, G32, G34
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