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The accentuated CEO career horizon problem: evidence from international acquisitions

Author

Listed:
  • Elie Matta

    (GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique)

  • Paul W. Beamish

    (Richard Ivey School of business - UWO - University of Western Ontario)

Abstract

We develop a conceptual model of the career horizon problem of CEOs approaching retirement and discuss its implications on firm risk taking, specifically in engagement in international acquisitions. Based on prospect theory and agency theory, we emphasize the legacy conservation and wealth preservation concerns of CEOs and investigate how their holdings of in-the-money unexercised options and firm equity accentuate or mitigate the career horizon problem. The model is tested in the context of international acquisitions with a sample of 293 U.S. firms over a five-year period (1995-1999). We find that a longer CEO career horizon is associated with a higher likelihood of international acquisitions. We also find that CEOs nearing retirement with high levels of in-the-money unexercised options and equity holdings are less likely to engage in international acquisitions than CEOs with low levels of in-the-money options and equity holdings. The study raises important considerations about the implications of CEOs' equity and in-the-money option holdings on firm risk taking at various stages of their career horizon. Copyright © 2008 John Wiley & Sons, Ltd.

Suggested Citation

  • Elie Matta & Paul W. Beamish, 2008. "The accentuated CEO career horizon problem: evidence from international acquisitions," Post-Print hal-00486653, HAL.
    • Handle: RePEc:hal:journl:hal-00486653
    DOI: 10.1002/smj.680
    as

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