We examine the organizational impact of CEO initial contract length on corporate acquisitions. We argue that CEOs with shorter initial contract lengths are more likely to experience time pressure. Consequently, they are more likely to manage time by engaging in real strategic investment actions such as corporate mergers and acquisitions (M&As) to achieve quick growth. In addition, these CEOs are more likely to acquire private, divested, related and small targets and to pay for these acquisitions with cash because these types of transactions are straightforward to complete, carry less risk, and generally come with good ex ante performance expectations. Using a sample of firms that underwent new CEO appointments between 1990 and 2017 and detailed employment contract data collected from SEC filings, we find strong support for our hypotheses. In addition, we apply U.K. corporate governance reform to CEO contract length as an exogenous shock to show that such relations are causal. This study contributes to the CEO contract, corporate acquisitions, and strategic leadership literature.
