Acquisition Experience and Director Remuneration

45 Pages Posted: 24 Jul 2020 Last revised: 9 Sep 2020

See all articles by Addis Birhanu

Addis Birhanu

EM Lyon (Ecole de Management de Lyon) - Emlyon Business School

Philipp Geiler

EMLYON Business School

Luc Renneboog

Tilburg University - Department of Finance; European Corporate Governance Institute (ECGI); Tilburg Law and Economics Center (TILEC)

Yang Zhao

University of Liverpool - Management School (ULMS)

Multiple version iconThere are 2 versions of this paper

Date Written: July 24, 2020

Abstract

We investigate whether acquisition experience of executive and non-executive directors is priced in their remuneration. We find that acquisition experience generates a contractual premium, and the relative size of this premium is higher for non-executive directors than for executives. Only a director’s track record related to past successful acquisitions is priced. Acquisition experience at the individual director is not remunerated if this type of experience is already abundantly present in the firm through the firm’s past acquisition record or via the experience of the other board members. We verify the results by examining potential endogeneity concerns, by analyzing a broad set of different views on acquisition experience (such as industry-specific, broad or international experience, experience on a target’s board), and by ruling out alternative explanations (such as a director’s general skills level or reputation).

Keywords: M&A, mergers, remuneration contracting, compensation, experience, human capital

JEL Classification: G34, M12, J30

Suggested Citation

Birhanu, Addis and Geiler, Philipp and Renneboog, Luc and Zhao, Yang, Acquisition Experience and Director Remuneration (July 24, 2020). European Corporate Governance Institute – Finance Working Paper No. 689/2020, Available at SSRN: https://ssrn.com/abstract=3659889 or http://dx.doi.org/10.2139/ssrn.3659889

Addis Birhanu

EM Lyon (Ecole de Management de Lyon) - Emlyon Business School ( email )

23 Avenue Guy de Collongue
Écully, 69130
France

Philipp Geiler

EMLYON Business School ( email )

23 Avenue Guy de Collongue
Ecully, 69132
France

Luc Renneboog (Contact Author)

Tilburg University - Department of Finance ( email )

P.O. Box 90153
Warandelaan 2
5000 LE Tilburg
Netherlands
+13 31 466 8210 (Phone)
+13 31 466 2875 (Fax)

European Corporate Governance Institute (ECGI)

c/o the Royal Academies of Belgium
Rue Ducale 1 Hertogsstraat
1000 Brussels
Belgium

Tilburg Law and Economics Center (TILEC)

Warandelaan 2
Tilburg, 5000 LE
Netherlands

Yang Zhao

University of Liverpool - Management School (ULMS) ( email )

Chatham Street
Liverpool, L69 7ZH
United Kingdom

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