CEO Compensation and Incentives - Evidence from M&A Bonuses
Cornell University - Samuel Curtis Johnson Graduate School of Management; Interdisciplinary Center (IDC) Herzliyah
University of Iowa - Henry B. Tippie College of Business
Journal of Financial Economics, Vol. 73, pp. 119-143, 2004
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
Date posted: November 8, 2005