The impact of target CEO celebrity on M&A premiums

We examine the influence of target-CEO celebrity on the premium paid by bidders using information asymmetry, uncertainty, and resource-based-view perspectives. Studies suggest that CEOs and their firms can suffer from a "burden of celebrity" if they fail to meet heightened performance expectations. We hypothesize that bidders acquire targets led by celebrity CEOs (those who garner significant and widespread media attention) with lower premiums because bidders react to market overvaluation. We also argue that celebrity CEOs who leave post-merger drive premiums even lower because they take their potential integration value with them. A six-year sample of US-based M&A transactions supports our hypotheses.