acquisitionstendedtotradeatlowerprice-to-bookratiosthan
otherfirms,andWeir(1997)addedtothisfindingbynoting
that target firms in hostile acquisitions also earned lower
returns on invested capital.
26 Finally,Pinkowitz(2003)foundnoevidencetosupportthe
conventional wisdom that firms with substantial cash
balances were more likely to become targets of hostile
acquisitions.
27 Insummary,then,targetfirmsinhostileacquisitionstend
tobesmaller,tradeatlowermultiplesofbookvalue,andearn
relatively low returns on their investments.
28
WhilemanyCEOchangesareeithervoluntary(retirementor
jobswitching),someCEOsareforcedoutbytheboard. In
recent years,researchers haveexaminedwhenforced CEO
turnover is most likely to occur.
- Stock price and earnings performance. Forced
turnoverismorelikelyinfirmsthathaveperformed
poorly relative to their peer group and to
expectations.
29 One manifestation of poor management is
overpayingonacquisitions,andthereisevidencethat
CEOs of acquiring firms that pay too much on
acquisitionsarefarmorelikelyto bereplacedthan
CEOs who do not do such acquisitions.
30 - Structureoftheboard.ForcedCEOchangesaremore
likely to occur when the board is small,
31 is composed of outsiders
32 andwhentheCEOisnotalsothechairmanofthe
board of directors.