Abstract

http://ssrn.com/abstract=1635444
 
 

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Liability Protection, Director Compensation, and Incentives


Iness Aguir


University of Texas at San Antonio - Department of Finance

Natasha Burns


University of Texas at San Antonio - Department of Finance

Sattar Mansi


Virginia Polytechnic Institute & State University

John K. Wald


University of Texas at San Antonio

November 23, 2012

Journal of Financial Intermediation, Forthcoming

Abstract:     
We examine the effect of liability protection on the compensation of directors and on takeover outcomes. Consistent with the hypothesis that directors require additional compensation if they bear liability, we find that director compensation is higher for firms that provide less liability protection. Examining takeovers, we find evidence that takeovers of firms with protected directors are less likely to succeed. Moreover, firms with protected directors are more likely to accept a lower bid premium, and this finding is consistent with protected directors having reduced incentives to negotiate for the highest possible price during the acquisition. Overall, the results are consistent with the notion that director liability provisions have a significant impact both on director compensation and director duty.

Number of Pages in PDF File: 38

Keywords: director liability, director compensation, takeovers

JEL Classification: G34, K22

Accepted Paper Series


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Date posted: July 6, 2010 ; Last revised: November 28, 2012

Suggested Citation

Aguir, Iness and Burns, Natasha and Mansi, Sattar and Wald, John K., Liability Protection, Director Compensation, and Incentives (November 23, 2012). Journal of Financial Intermediation, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1635444 or http://dx.doi.org/10.2139/ssrn.1635444

Contact Information

Iness Aguir
University of Texas at San Antonio - Department of Finance ( email )
San Antonio, TX 78249
United States
Natasha Burns
University of Texas at San Antonio - Department of Finance ( email )
San Antonio, TX 78249
United States
210-458-6838 (Phone)
Sattar Mansi
Virginia Polytechnic Institute & State University ( email )
John K. Wald (Contact Author)
University of Texas at San Antonio ( email )
1 UTSA Circle
San Antonio, TX 78249
United States
210-458-6324 (Phone)
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