Compensation Differences and Merger Outcomes

50 Pages Posted: 11 Oct 2014 Last revised: 22 Apr 2018

See all articles by Vidhan K. Goyal

Vidhan K. Goyal

Hong Kong University of Science & Technology (HKUST) - Department of Finance

Zilong Zhang

City University of Hong Kong

Date Written: November 1, 2016

Abstract

We find that differences in the compensation of acquirer and target firms' management teams negatively affect the outcomes of mergers. Larger differences in top management pay are associated with lower returns to the acquiring firm after the announcement of the merger and negative combined wealth effects. Larger pay differences also increase the likelihood of employee layoffs. Overall, our results suggest that differences in executive compensation are indicators of integration problems at merging firms, which in turn negatively affect merger outcomes.

Keywords: CEO compensation, Mergers and acquisitions, Post-merger integration

JEL Classification: G34, J33

Suggested Citation

Goyal, Vidhan K. and Zhang, Zilong, Compensation Differences and Merger Outcomes (November 1, 2016). Available at SSRN: https://ssrn.com/abstract=2508152 or http://dx.doi.org/10.2139/ssrn.2508152

Vidhan K. Goyal (Contact Author)

Hong Kong University of Science & Technology (HKUST) - Department of Finance ( email )

Clear Water Bay, Kowloon
Hong Kong
852-2358-7678 (Phone)
852-2358-1749 (Fax)

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

Zilong Zhang

City University of Hong Kong ( email )

83 Tat Chee Avenue
Kowloon
Hong Kong

Register to save articles to
your library

Register

Paper statistics

Downloads
201
Abstract Views
1,915
rank
152,363
PlumX Metrics