Sales of Private Firms and the Role of CEO Compensation

48 Pages Posted: 17 Jun 2013 Last revised: 1 Mar 2017

Natasha Burns

University of Texas at San Antonio - Department of Finance

Jan Jindra

U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis

Kristina Minnick

Bentley University

Date Written: December 31, 2016

Abstract

We analyze the relation of private firms’ CEO compensation with the probability of sale of a firm and its valuation at the time of the sale. Specifically, we study whether equity-based remuneration is consistent with compensating the CEO for effort related to selling the private firm, or with compensating for the illiquidity of the equity-based compensation for private firms. Using a sample of large private firms with public filings, we find that CEOs of IPO and acquired private firms have higher total and equity-based compensation than CEOs of firms that remain private. We also show that CEO compensation is positively related to the valuation premium of IPOs versus acquired firms.

Keywords: private firms, mergers and acquisitions, initial public offerings, CEO compensation

JEL Classification: G34

Suggested Citation

Burns, Natasha and Jindra, Jan and Minnick, Kristina, Sales of Private Firms and the Role of CEO Compensation (December 31, 2016). Journal of Corporate Finance, Vol. 43, 2017. Available at SSRN: https://ssrn.com/abstract=2280000 or http://dx.doi.org/10.2139/ssrn.2280000

Natasha Burns

University of Texas at San Antonio - Department of Finance ( email )

San Antonio, TX 78249
United States
210-458-6838 (Phone)

Jan Jindra (Contact Author)

U.S. Securities and Exchange Commission - Division of Economic and Risk Analysis ( email )

44 Montgomery Street
San Francisco, CA 94104
United States

Kristina Minnick

Bentley University ( email )

175 Forest Street
Waltham, MA 02154
United States

HOME PAGE: http://www.profminnick.com/

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