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

December 8, 2015

Journal of Accounting & Economics (JAE), Vol. 61, 2016, Forthcoming

Abstract:     
Do merger bonuses to target CEOs facilitate a wealth transfer from target to acquirer shareholders? We test this hypothesis against an alternative that bonuses enable a useful contractual revision in compensation contracts when takeovers generate small synergies. When target CEOs get a merger bonus, acquirers pay lower premiums, but they also typically get less in the form of low synergies. Moreover, both stock and accounting returns to the acquirers are lower on average in deals with target CEO bonuses. These results support the contractual revision alternative. Nevertheless, wealth transfer occurs when merger bonuses are present in deals where targets exhibit high pre-takeover abnormal accruals or are subject to SEC enforcement actions.

Number of Pages in PDF File: 63

Keywords: Merger bonus; Acquisitions; Synergies; Wealth transfer; Abnormal accruals; SEC enforcement actions

JEL Classification: G30, G34, J33


Open PDF in Browser Download This Paper

Date posted: September 2, 2012 ; Last revised: December 17, 2015

Suggested Citation

Fich, Eliezer M. and Rice, Edward M. and Tran, Anh L., Contractual Revisions in Compensation: Evidence from Merger Bonuses to Target CEOs (December 8, 2015). Journal of Accounting & Economics (JAE), Vol. 61, 2016, Forthcoming. 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
Feedback to SSRN


Paper statistics
Abstract Views: 1,704
Downloads: 252
Download Rank: 89,016

© 2016 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollobot1 in 0.281 seconds