Download This PaperDoes Threat of Dismissal Constrain Acquisition Premium in CEO Pay?
23 Pages Posted: 18 Jan 2016
Date Written: December 2015
Abstract
This paper shows that the likelihood of post‐acquisition CEO turnover can act as a constraint on risky acquisition decisions. The acquisition premium in pay decreases by over 50% once the dismissal risk is controlled for. Given a smaller pay premium for undertaking acquisitions and a non‐zero risk of dismissal, shareholders are shown to be able to exercise some control over managerial incentives to engage in risky acquisitions through the mechanism for dismissal.
Suggested Citation: Suggested Citation
HomRoy, Swarnodeep, Does Threat of Dismissal Constrain Acquisition Premium in CEO Pay? (December 2015). Economica, Vol. 82, pp. 1349-1371, 2015, Available at SSRN: https://ssrn.com/abstract=2716507 or http://dx.doi.org/10.1111/ecca.12163
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