The disciplinary role of failed takeover attempts

I find that the CEO turnover in target firms following failed takeover attempts is 21% greater than matched nontarget firms and negatively correlated with stock returns both before and during the attempt. Target firms are 14% more likely than matched nontarget firms to initiate corporate restructurings during the failed attempt. Restructured firms have more positive stock returns during this period and are less likely to experience subsequent CEO turnover. When restructurings do not occur, active outside blockholders are more likely to emerge and facilitate CEO turnover. These findings indicate that failed takeover attempts can play a disciplinary role.