Bank Mergers, the Market for Bank CEOS, and Managerial Incentives

39 Pages Posted: 17 Jun 2003

See all articles by Christopher W. Anderson

Christopher W. Anderson

University of Kansas - School of Business

David Becher

Drexel University

Terry L. Campbell

University of Delaware - Department of Finance

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Abstract

After a large bank merger the compensation of the surviving bank's CEO often increases materially. Theories of executive compensation based on managerial productivity and optimal incentives suggest that changes in CEO compensation are related to the potential gains from merger. Alternatively, compensation gains might result from an increase in bank size regardless of whether the merger creates value. We examine mergers among billion-dollar banks in the 1990s and find results consistent with managerial productivity. Specifically, we show empirically that changes in CEO compensation after mergers are positively related to anticipated gains from merger measured at the announcement date. Other changes in the structure of compensation are also consistent with hypotheses based on managerial productivity and incentive restructuring.

Keywords: Bank mergers, CEO compensation

JEL Classification: G21, G34

Suggested Citation

Anderson, Christopher W. and Becher, David and Campbell, Terry Lee, Bank Mergers, the Market for Bank CEOS, and Managerial Incentives. Available at SSRN: https://ssrn.com/abstract=373640 or http://dx.doi.org/10.2139/ssrn.373640

Christopher W. Anderson

University of Kansas - School of Business ( email )

1300 Sunnyside Ave
Lawrence, KS 66045
United States
785-864-7340 (Phone)
785-864-5328 (Fax)

HOME PAGE: http://www.business.ku.edu/gen/bschool_generated_pages/Anderson_Christopher_p1587.html

David Becher (Contact Author)

Drexel University ( email )

3220 Market Street
1127 Gerri C LeBow Hall
Philadelphia, PA 19104
United States
215-895-2274 (Phone)
215-895-2295 (Fax)

Terry Lee Campbell

University of Delaware - Department of Finance ( email )

College of Business and Economics
Newark, DE 19716
United States

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