CEO Career Concerns and Acquisitions

Managers understand that their current actions and choices affect the labor market's assessment of their human capital and hence their expected future wages and/or career opportunities. As long as the value of the manager's human capital is positively correlated with firm performance, career concerns work to align manager and shareholder interests. In this paper I draw attention to the career implications to CEOs who make large acquisitions and show that a CEO's human capital is enhanced even via poor performing acquisitions. Specifically, I find that although the probability of forced CEO turnover is negatively correlated with acquisition performance, the average number of board seats held by the CEO with acquisition experience increases following the acquisition irrespective of acquisition performance. My results suggest that CEOs that make large acquisitions---even poor performing acquisitions---gain valuable human capital that leads to additional board seat opportunities.