Abstract

http://ssrn.com/abstract=2139732
 


 



Contractual revisions in compensation: Evidence from merger bonuses to target CEOs


Eliezer M. Fich


Drexel University - Department of Finance

Edward M. Rice


University of Washington - Michael G. Foster School of Business

Anh L. Tran


Cass Business School, City University London

January 09, 2014


Abstract:     
Several papers find that when target CEOs get extra benefits during mergers, takeover premiums are lower. This is interpreted as a conflict of interest: target CEOs sacrifice premiums for personal gain, facilitating a wealth transfer from target to acquirer shareholders. We examine merger bonuses and find evidence inconsistent with wealth transfer. Results indicate that when target CEOs get bonuses, acquirers pay less but also get less in the form of low synergies. The evidence suggests that bonuses are used to revise compensation contracts when takeovers generate small synergy gains helping firms circumvent conflicts of interests between target CEOs and their shareholders.

Number of Pages in PDF File: 42

Keywords: Merger bonus, Acquisitions, Synergies

JEL Classification: G30, G34, J33

working papers series


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Date posted: September 2, 2012 ; Last revised: January 9, 2014

Suggested Citation

Fich, Eliezer M. and Rice, Edward M. and Tran, Anh L., Contractual revisions in compensation: Evidence from merger bonuses to target CEOs (January 09, 2014). Available at SSRN: http://ssrn.com/abstract=2139732 or http://dx.doi.org/10.2139/ssrn.2139732

Contact Information

Eliezer M. Fich
Drexel University - Department of Finance ( email )
LeBow College of Business
3220 Market Street – 11th Floor
Philadelphia, PA 19104
(215) 895-2304 (Phone)
Edward M. Rice (Contact Author)
University of Washington - Michael G. Foster School of Business ( email )
Box 353200
Seattle, WA 98195-3200
United States
Anh L. Tran
Cass Business School, City University London ( email )
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44-207-040-5109 (Phone)
+44-207-040-8881 (Fax)
HOME PAGE: http://www.cass.city.ac.uk/experts/A.Tran
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