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Skill differences in corporate acquisitions

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  • Jaffe, Jeffrey
  • Pedersen, David
  • Voetmann, Torben

Abstract

Are there skill differences in mergers and acquisitions? To investigate this question, we focus on persistence in the performance of corporate acquirers. We find persistence only when successive deals occur under the same CEO and conclude that skill differences in acquisitions reside with the CEO, not with the firm as a whole. These differences are economically meaningful. An acquirer that was successful in its last deal and kept its CEO earns 1.02% more on its next deal than does a previously-unsuccessful firm that kept its CEO. This percentage difference is equivalent to a $175million difference in value creation.

Suggested Citation

  • Jaffe, Jeffrey & Pedersen, David & Voetmann, Torben, 2013. "Skill differences in corporate acquisitions," Journal of Corporate Finance, Elsevier, vol. 23(C), pages 166-181.
    • Handle: RePEc:eee:corfin:v:23:y:2013:i:c:p:166-181
    DOI: 10.1016/j.jcorpfin.2013.08.007
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    Cited by:

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    3. Renneboog, Luc & Vansteenkiste, Cara, 2019. "Failure and success in mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 58(C), pages 650-699.
    4. Dutordoir, Marie & Strong, Norman C. & Sun, Ping, 2022. "Does short-selling potential influence merger and acquisition payment choice?," Journal of Financial Economics, Elsevier, vol. 144(3), pages 761-779.
    5. Fich, Eliezer M. & Nguyen, Tu, 2020. "The value of CEOs' supply chain experience: Evidence from mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 60(C).
    6. Delis, Manthos D. & Iosifidi, Maria & Kazakis, Pantelis & Ongena, Steven & Tsionas, Mike G., 2022. "Management practices and M&A success," Journal of Banking & Finance, Elsevier, vol. 134(C).
    7. Bessler, Wolfgang & Schneck, Colin & Zimmermann, Jan, 2015. "Bidder contests in international mergers and acquisitions: The impact of toeholds, preemptive bidding, and termination fees," International Review of Financial Analysis, Elsevier, vol. 42(C), pages 4-23.
    8. Delis, Manthos D. & Iosifidi, Maria & Tsionas, Mike, 2020. "Management estimation in banking," European Journal of Operational Research, Elsevier, vol. 284(1), pages 355-372.
    9. Sangjun Cho & Chune Young Chung, 2022. "Review of the Literature on Merger Waves," JRFM, MDPI, vol. 15(10), pages 1-21, September.
    10. Ferris, Stephen P. & Sainani, Sushil, 2021. "Do CFOs matter? Evidence from the M&A process," Journal of Corporate Finance, Elsevier, vol. 67(C).
    11. Golubov, Andrey & Yawson, Alfred & Zhang, Huizhong, 2015. "Extraordinary acquirers," Journal of Financial Economics, Elsevier, vol. 116(2), pages 314-330.
    12. Lin, Ji-Chai & Stephens, Clifford P. & Wu, YiLin, 2014. "Limited attention, share repurchases, and takeover risk," Journal of Banking & Finance, Elsevier, vol. 42(C), pages 283-301.

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    More about this item

    Keywords

    Mergers and acquisitions; Skill; Persistence; CEO;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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