Abstract

http://ssrn.com/abstract=954159
 
 

References (24)



 


 



The Impacts of Firm Expansions on the CEO Wealth: A Look at CEO Incentives to Make Expansion Decisions


Yilei Zhang


University of North Dakota

Zhan Jiang


Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF)

June 2007


Abstract:     
We investigate the impact of firm expansion decisions on CEO wealth and derive the ex ante wealth-driven incentives. We find that CEO incentives are determined by a combined influence of multiple factors, including board compensation policy, stock market mispricing, as well as CEO's own portfolio adjustment. We analyze these effects by decomposing CEO's new grants and existing portfolio, isolating CEO wealth gains and losses, and separating short-run and long-run effects. We further contribute to the literature by identifying the pay-for-size sensitivity as part of the board compensation policy, which is less recognized in the literature than the pay-for-performance sensitivity. We document CEO compensation in expansion firms is more sensitive to size increase than in non-expansion firms. This pay-for-size sensitivity provides an additional incentive for expansion. In addition to analyze the expansion firms on average, we compare the characteristics and CEO incentives in acquisition and internal growth firms.

Number of Pages in PDF File: 52

Keywords: mergers and acquisitions, corporate governance, managerial incentives, corporate investment, pay-for-size sensitivity

JEL Classification: G34, J33

working papers series


Download This Paper

Date posted: January 2, 2007  

Suggested Citation

Zhang, Yilei and Jiang, Zhan, The Impacts of Firm Expansions on the CEO Wealth: A Look at CEO Incentives to Make Expansion Decisions (June 2007). Available at SSRN: http://ssrn.com/abstract=954159 or http://dx.doi.org/10.2139/ssrn.954159

Contact Information

Yilei Zhang (Contact Author)
University of North Dakota ( email )
Box 7096
Grand Forks, ND 58202
United States
Zhan Jiang
Shanghai Jiao Tong University (SJTU) - Shanghai Advanced Institute of Finance (SAIF) ( email )
Shanghai
China
Feedback to SSRN


Paper statistics
Abstract Views: 798
Downloads: 167
Download Rank: 99,948
References:  24

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo7 in 0.515 seconds