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CEO Compensation and Incentives - Evidence from M&A Bonuses

Posted: 8 Nov 2005  

Yaniv Grinstein

Cornell University - Samuel Curtis Johnson Graduate School of Management; Interdisciplinary Center (IDC) Herzliyah

Paul Hribar

University of Iowa - Henry B. Tippie College of Business

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Abstract

We investigate CEO compensation for completing M&A deals. We find that CEOs who have more power to influence board decisions receive significnatly larger bonuses. We also find a positive relation between bonus compensation and measures of effort, but not between bonus compensation and deal performance. CEO with more power also tend to engage in larger deals relative to the size of their own firms, and the market responds more negatively to their acquisition announcements. Our evidence is consistent with the argument that managerial power is the primary driver of M&A bonuses.

Keywords: CEO compensation, Mergers and acquisitions

JEL Classification: G34, J33

Suggested Citation

Grinstein, Yaniv and Hribar, Paul, CEO Compensation and Incentives - Evidence from M&A Bonuses. Journal of Financial Economics, Vol. 73, pp. 119-143, 2004. Available at SSRN: https://ssrn.com/abstract=837667

Yaniv Grinstein (Contact Author)

Cornell University - Samuel Curtis Johnson Graduate School of Management ( email )

Sage Hall
Ithaca, NY 14853
United States
607-255-8686 (Phone)
607-254-4590 (Fax)

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

Paul Hribar

University of Iowa - Henry B. Tippie College of Business ( email )

Dept. of Accounting
Iowa City, IA 52242-1000
United States
319-335-1008 (Phone)

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