Do Acquirer CEO Incentives Impact Mergers?

42 Pages Posted: 25 Jul 2012 Last revised: 9 May 2014

See all articles by David Becher

David Becher

Drexel University

Jennifer L. Juergens

Cornerstone Research, Inc.

Date Written: December 2013


This paper examines the mechanisms by which acquirer CEOs are incentivized and their impact on merger decisions. We argue that the pre-merger structure of CEO wealth impacts a CEO’s risk tolerance and ultimately her willingness to undertake a merger as well as the framework of the deal. As the riskiness of CEO wealth increases (as measured by excess vega or cumulative option-based wealth), firms are more likely to become an acquirer, pay higher premiums, and experience lower post-merger performance. These results hold controlling for CEO overconfidence and cannot be attributed to firms altering incentives to induce CEOs to partake in mergers. Post financial crisis, we find both a shift in the composition of CEO pay and its relation to mergers. Overall, these results have important policy implications in the debate over optimal CEO pay as the structure by which CEOs are compensated appears to impact firm choices.

Keywords: Mergers, CEO compensation, CEO ownership, incentive wealth

JEL Classification: G32, G34, J33

Suggested Citation

Becher, David and Juergens, Jennifer L., Do Acquirer CEO Incentives Impact Mergers? (December 2013). Available at SSRN: or

David Becher

Drexel University ( email )

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1127 Gerri C LeBow Hall
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215-895-2274 (Phone)
215-895-2295 (Fax)

Jennifer L. Juergens (Contact Author)

Cornerstone Research, Inc.

2001 K Street NW
North Tower, Suite 800
Washington, DC 20006
United States

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