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http://ssrn.com/abstract=417763
 
 

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CEO Compensation and Incentives - Evidence From M&A Bonuses


Yaniv Grinstein


Cornell University - Samuel Curtis Johnson Graduate School of Management

Paul Hribar


University of Iowa - Henry B. Tippie College of Business

June 2003

Cornell University Working Paper

Abstract:     
We investigate CEO compensation for completing M&A deals. 39% of the acquiring firms in our sample state that they compensate their CEOs for completing the deal, and that the compensation comes mainly in the form of a cash bonus. We find that CEOs who have more power to influence board decisions receive significantly larger bonuses. We also find a positive relation between bonus compensation and measures of effort, but not between bonus compensation and deal performance. CEOs with more power also tend to engage in larger deals relative to the size of their own firms, and the market responds more negatively to their acquisition announcements. Our evidence is consistent with the argument that managerial power is the primary driver of M&A bonuses.

Number of Pages in PDF File: 38

Keywords: Compensation, Mergers and Acquisitions

JEL Classification: G34, J33

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Date posted: August 13, 2003  

Suggested Citation

Grinstein, Yaniv and Hribar, Paul, CEO Compensation and Incentives - Evidence From M&A Bonuses (June 2003). Cornell University Working Paper. Available at SSRN: http://ssrn.com/abstract=417763 or http://dx.doi.org/10.2139/ssrn.417763

Contact Information

Yaniv Grinstein (Contact Author)
Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )
Sage Hall
Ithaca, NY 14853
United States
607-255-8686 (Phone)
607-254-4590 (Fax)

Paul Hribar
University of Iowa - Henry B. Tippie College of Business ( email )
Dept. of Accounting
Iowa City, IA 52242-1000
United States
319-335-1008 (Phone)
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