Merger Activity and Executive Pay
31 Pages Posted: 9 Apr 2002
Date Written: March 2002
Abstract
This Paper examines the impact of mergers and acquisitions on the remuneration of the CEOs in a large unbalanced panel of UK firms, over the period 1981-96. We find significant and substantial executive pay increases in excess of those generated by the growth in firm size consequent upon the merger. This is consistent with the view that mergers reveal information about the quality of management that is useful to the firm's remuneration committee. Executive pay is, however, nine times more sensitive to internal growth than to growth as a result of acquisition. Furthermore, there is some evidence that hostile transactions generate smaller pay effects than friendly deals, probably because they are followed, at some remove, by size-reducing divestments. When mergers are distinguished by their impact on shareholder wealth we find that CEOs engaging in 'bad' (i.e. wealth-reducing) acquisitions experience significantly lower remuneration than their counterparts whose deals meet with market approval. This result suggests that shareholder-principals have at least some success in penalising managers for unwarranted empire-building mergers.
Keywords: Mergers, acquisition, executive pay
JEL Classification: J20, J30
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Executive Compensation and Corporate Governance in China
By Martin J. Conyon and Lerong He
-
Executive Compensation and Corporate Fraud in China
By Martin J. Conyon and Lerong He
-
CEO Compensation and Corporate Governance in China
By Martin J. Conyon and Lerong He
-
CEO Compensation and Corporate Governance in China
By Martin J. Conyon and Lerong He
-
Corporate Governance and CEO Compensation in China
By Oliver M. Rui, Michael Firth, ...
-
By Takao Kato and Cheryl Long
-
Firm Performance, Governance Structure, and Top Management Turnover in a Transitional Economy
By Michael Firth, Peter M.y. Fung, ...
-
Firm Performance, Governance Structure, and Top Management Turnover in a Transitional Economy
By Michael Firth, Peter M.y. Fung, ...
-
How Ownership and Corporate Governance Influence Chief Executive Pay in China's Listed Firms
By Michael Firth, Peter M.y. Fung, ...
-
Is China's Securities Regulatory Agency a Toothless Tiger? Evidence from Enforcement Actions
By Michael Firth, Gong-meng Chen, ...