Abstract

http://ssrn.com/abstract=2117397
 
 

References (62)



 


 



Do Acquirer CEO Incentives Impact Mergers?


David A. Becher


Drexel University - Department of Finance

Jennifer L. Juergens


Drexel University - Department of Finance

December 2013


Abstract:     
This paper examines the mechanisms by which acquirer CEOs are incentivized and their impact on merger decisions. We argue that the pre-merger structure of CEO wealth impacts a CEO’s risk tolerance and ultimately her willingness to undertake a merger as well as the framework of the deal. As the riskiness of CEO wealth increases (as measured by excess vega or cumulative option-based wealth), firms are more likely to become an acquirer, pay higher premiums, and experience lower post-merger performance. These results hold controlling for CEO overconfidence and cannot be attributed to firms altering incentives to induce CEOs to partake in mergers. Post financial crisis, we find both a shift in the composition of CEO pay and its relation to mergers. Overall, these results have important policy implications in the debate over optimal CEO pay as the structure by which CEOs are compensated appears to impact firm choices.

Number of Pages in PDF File: 42

Keywords: Mergers, CEO compensation, CEO ownership, incentive wealth

JEL Classification: G32, G34, J33

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Date posted: July 25, 2012 ; Last revised: May 9, 2014

Suggested Citation

Becher, David A. and Juergens, Jennifer L., Do Acquirer CEO Incentives Impact Mergers? (December 2013). Available at SSRN: http://ssrn.com/abstract=2117397 or http://dx.doi.org/10.2139/ssrn.2117397

Contact Information

David A. Becher
Drexel University - Department of Finance ( email )
218 Academic Bldg.
Philadelphia, PA 19104
United States
215-895-2274 (Phone)
215-895-2295 (Fax)
Jennifer L. Juergens (Contact Author)
Drexel University - Department of Finance ( email )
LeBow College of Business
Philadelphia, PA 19104
United States
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