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CEO Power, Governance, and Acquisitions
Derek Oler, Indiana University
Bradley Olson, University of Lethbridge
Christopher J. Skousen, Utah State University
ABSTRACT. We investigate the relationship between various measures of CEO power, corporate governance, and acquisitions. We find CEOs with greater tenure are more likely to pursue acquisitions, but CEOs holding more prior firm positions, sit on the boards of other corporations, and with greater ownership power are less likely to pursue an acquisition. In determining the likelihood an acquisition will be diversifying, we find that a CEO with higher ownership power is less likely to pursue a diversification. CEOs with an elite education and with more than one title are more likely to pursue a radical diversification. Firms with stronger corporate governance do not appear less likely to pursue an acquisition, while stronger corporate governance suggests that an acquisition is less likely to be diversifying. We also find that the market views acquisitions as value-increasing when the CEO has greater tenure and value-decreasing when the CEO is also the firm’s founder.
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