How Do CEOs Matter? The Effect of Industry Expertise on Acquisition Returns

Custódio, Cláudia; Metzger, Daniel

doi:10.1093/rfs/hht032

Cited by 230 publications

(115 citation statements)

References 48 publications

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“…The numerical strength of the team reflects the managerial resources available to the firm for it brings diversity to corporate decisionmaking in areas such as opportunity seeking and negotiations. Compared with small-sized teams, for example, 12 We would like to thank Cláudia Custódio and Daniel Metzger for kindly sharing their extended Execucomp-BoardEx CEO data set used in Custódio and Metzger (2013). 13 Execucomp collects up to nine executives from each company's annual proxy statement (Securities and Exchange Commission (SEC) form DEF14A) for a given year, and hence, cannot capture all of the company's top managers but for the purpose of our analysis this information is sufficient.…”

Section: Formal Testsmentioning

confidence: 99%

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Extraordinary acquirers

Golubov

Yawson

Zhang

2015

Journal of Financial Economics

141

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Firm fixed effects alone explain as much of the variation in acquirer returns as all the firm-and deal-specific characteristics combined. An interquartile range of acquirer fixed effects is over 6%, comparable to the interquartile range of acquirer returns. Acquirer returns persist over time, but mainly at the top end of the distribution. Persistence continues under different chief executive officers (CEOs), and attributes of the broader management team do not explain the fixed effect. Firm-specific heterogeneity in acquirer returns suggests that some organizations are extraordinary acquirers irrespective of the leadership at the top and the deal structures they choose. Implications for the M&A research are discussed.

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Section: Formal Testsmentioning

confidence: 99%

“…In contrast, Gompers, Kovner, Lerner, and Scharfstein (2010) find persistence in the success of serial entrepreneurs across their ventures. In the M&A context, Custódio and Metzger (2013) show that acquiring firm CEO's expertise in the target industry leads to better performance in diversifying acquisitions.…”

Section: Introductionmentioning

confidence: 99%

Extraordinary acquirers

Golubov

Yawson

Zhang

2015

Journal of Financial Economics

141

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“…I use the most popular approach in recent empirical literature for this estimation, namely, the market model (for example, Harford et al 2012;Custódio and Metzger 2013;Deng et al 2013;Vermaelen and Xu 2014). This model differentiates between an estimation period and the actual event window.…”

Section: Calculation Of Abnormal Returnsmentioning

confidence: 99%

“…My estimation period starts at t 0 = −190, thus 190 days before the actual takeover announcement to 41 days before the announcement, resulting in t 1 = −41. As suggested by Andrade et al (2001) and also common in recent studies (for example, Becher et al 2012;Custódio and Metzger 2013;Fu et al 2013), I use a symmetric 3-day event window starting at t 2 = −1 and ending at t 3 = 1. This setting allows for possible abnormal returns before the actual announcement and for price adjustments after the announcement.…”

Section: Calculation Of Abnormal Returnsmentioning

confidence: 99%

Challenging the payment effect in bank-financed takeovers

Fischer

2015

J Manag Control

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In the context of bank-financed takeovers, I examine the influence of loans and their characteristics on the success of acquisitions. The unique setting of matched syndicated loans allows me to forego the regular assumption in academic literature of cash payment being equal to debt financing. Consequently, I am able to distinguish between the payment effect and the financing effect of an acquisition. My three main findings are: (i) Payment method is just an estimator of the debt proportion in takeovers. Although percentage of cash has significant explanatory power to account for the sources of financing, variation still remains. (ii) Controlling for the real financial structure renders the payment method insignificant. Hence, the well-known outperformance of cash payment around the announcement of a takeover might actually just be an outperformance of debt-financed takeovers. (iii) Bank-financed acquisitions are associated, on average, with positive abnormal returns for acquirers' stockholders. Higher bank involvements-approximated by greater deal leverage, higher loan costs, longer maturity, lower interest coverage, or no previous banking relationship-are signals for a more successful takeover.

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“…Studies have shown that executives affect the performance of firms (e.g. Bennedsen et al 2008;Custodio and Metzger 2013;Kaplan et al 2012) and their policy choices (e.g. Bertrand and Schoar 2003;Malmendier et al 2011).…”

Section: Introductionmentioning

confidence: 99%

Financial Crisis, Bank Behaviour and Credit Crunch

Rossi¹,

Malavasi²

2016

Contributions to Economics

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This book explores some relevant distortions and market failures in financial and banking markets caused by the recent financial crisis and offers important insights to policymakers as well. After having introduced the reader to the economic background behind the origin of the present financial turmoil, the book proposes a distinct angle to look at some macro and microeconomic aspects. The volume discusses whether and to what extent policies, implemented by governments and monetary authorities to countervail bank defaults and avoid a disastrous financial instability, have in some way determined opportunistic conducts (moral hazard), changes in banks' behaviour, distortive incentives and market failures. Furthermore, the book offers a viewpoint on the effects of the evolution of regulation for the banking sector. Finally, the book assesses how the increase in the cost of funding and the shrinking in credit supply (credit crunch) has modified the financial structure of small and medium firms. To illustrate this, some specific cases at Italian regional level are examined

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How Do CEOs Matter? The Effect of Industry Expertise on Acquisition Returns

Cited by 230 publications

References 48 publications

Extraordinary acquirers

Extraordinary acquirers

Challenging the payment effect in bank-financed takeovers

Financial Crisis, Bank Behaviour and Credit Crunch

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