Acquisitions and CEO Power: Evidence from French Networks

The market reaction around an acquisition announcement predicts whether the acquiring firms later complete the deal (Luo, 2005). In this way, CEOs of the acquiring firms are morelikely to cancel acquisitions when the market does not react favorably to the announcement. Using a sample of French acquisition announcements from 2000 to 2005, this paper studies the conditions under which CEOs are more willing to listen to investors. From the power typology of Finkelstein (1992), we find that CEOs with a high ownership and expertise powers listen to the market. Considering the strong networks of the French Elite Schools Alumni, we also find that the well-connected CEOs are more likely to complete a deal in spite of a negative market reaction on acquisition announcement.

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