CEO Compensation and Bank Mergers
35 Pages Posted: 28 Mar 2000
Date Written: February 2000
Recent bank mergers generally did not improve relative operating performance or produce positive abnormal returns to acquiring bank shareholders. We examine the relationship between mergers and CEO compensation during 1986-1995, a period marked by overcapacity and frequent mergers. We find that mergers have a net positive effect on compensation, mainly via the effect of size on compensation. Compensation generally increases even if mergers cause the acquiring bank's stock price to decline, as is typical after a merger announcement. The form of compensation affects merger decisions, since CEOs with more stock-based wealth or compensation were less likely to make an acquisition.
JEL Classification: G21, G34
Suggested Citation: Suggested Citation