The Impact of Merger Activity on Executive Pay in the United Kingdom

19 Pages Posted: 8 May 2006

See all articles by Sourafel Girma

Sourafel Girma

Nottingham University Business School

Steve Thompson

Nottingham University Business School (NUBS)

Peter W Wright

University of Sheffield - Department of Economics

Abstract

We examine the impact of mergers and acquisitions on the remuneration of CEOs in the UK from 1981 to 1996. We find that CEO pay is not strongly related to company performance. In contrast, increases in firm size do have a significant impact. There is also evidence that acquisitions offer CEOs the scope to influence their pay positively. We also note however that CEOs engaging in '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 penalizing managers for unwarranted, empire-building, mergers.

Suggested Citation

Girma, Sourafel and Thompson, R.S. and Wright, Peter W, The Impact of Merger Activity on Executive Pay in the United Kingdom. Economica, Vol. 73, No. 290, pp. 321-339, May 2006. Available at SSRN: https://ssrn.com/abstract=896822 or http://dx.doi.org/10.1111/j.1648-0335.2006.00513.x

Sourafel Girma (Contact Author)

Nottingham University Business School ( email )

Jubilee Campus
Nottingham, NG8 1BB
United Kingdom
+44 0 115 8466656 (Phone)

HOME PAGE: http://www.nottingham.ac.uk/~lizsmg/

R.S. Thompson

Nottingham University Business School (NUBS) ( email )

Jubilee Campus
Wollaton Road
Nottingham, NG8 1BB
United Kingdom

HOME PAGE: http://www.nottingham.ac.uk/cgi-bin/directory_lookup.cgi?surname=Thompson&initials=&number=&departme

Peter W Wright

University of Sheffield - Department of Economics ( email )

9 Mappin Street
Sheffield, S1 4DT
UNITED KINGDOM

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