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Does Target CEO Retention in Acquisitions Involving Private Equity Acquirers Harm Target Shareholders?


  • Bargeron, Leonce

    (University of Pittsburgh)

  • Schlingemann, Frederik P.

    (University of Pittsburgh and Erasmus University Rotterdam)

  • Zutter, Chad J.

    (University of Pittsburgh)

  • Stulz, Rene M.

    (OH State University and European Corporate Governance Institute)


While there is widespread concern that target CEO retention by the acquirer harms target shareholders when the acquirer is a private equity firm, CEO retention can also be valuable to private equity acquirers, and hence potentially benefit shareholders. We find that CEO retention does not harm target shareholders when the acquirer is a private equity firm. In fact, we show that, in acquisitions by private equity firms, better performing CEOs are more likely to be retained and target shareholders gain an additional 10% to 23% of pre-acquisition firm value when the CEO is retained compared to when the CEO is not retained. In contrast, shareholders of targets acquired by operating companies do not benefit from CEO retention. Finally, we find no evidence that the target's value is artificially depressed ahead of a private equity acquisition where the CEO is retained.

Suggested Citation

  • Bargeron, Leonce & Schlingemann, Frederik P. & Zutter, Chad J. & Stulz, Rene M., 2012. "Does Target CEO Retention in Acquisitions Involving Private Equity Acquirers Harm Target Shareholders?," Working Paper Series 2012-26, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
  • Handle: RePEc:ecl:ohidic:2012-26

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    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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