How do CEOs matter? The effect of industry expertise on acquisition returns

Cláudia Custódio, Daniel Metzger

Research output: Contribution to journalArticlepeer-review

128 Scopus citations


This paper shows how chief executive officer (CEO) characteristics affect the performance of acquirers in diversifying takeovers. When the acquirer's CEO has previous experience in the target industry, the acquirer's abnormal announcement returns are between 1.2 and 2.0 percentage points larger than those generated by a CEO who is new to the target industry. This outcome is driven by the industry-expert CEO's ability to capture a larger fraction of the merger surplus. Industry-expert CEOs typically negotiate better deals and pay a lower premium for the target. This effect is stronger when information asymmetry is high and in bilateral negotiations compared to auctions. We also find that industry-expert CEOs on average select lower surplus deals. This evidence is consistent with industry-expert CEOs having superior negotiation skills.

Original languageEnglish (US)
Pages (from-to)2007-2047
Number of pages41
JournalReview of Financial Studies
Issue number8
StatePublished - Aug 1 2013

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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