Abstract
We estimate the effect of acquisition performance and acquisition activity on CEO compensation for the full set of CEOs of large public U.S. corporations in the Execucomp database over the period 1992-2016. Most previous work has focused on publicly traded acquisition targets. We focus on the comparison between public and private targets, showing significant differences between the two. One primary finding, based on panel data regressions (both fixed and random effects) is that the performance of private acquisitions, as measured by abnormal announcement returns, has a statistically significant positive effect of plausible economic magnitude on CEO compensation. Public acquisitions exhibit a smaller positive effect that is statistically insignificant. For both, acquisition activity (number of acquisitions) has a statistically significant effect on compensation. Furthermore, compensation is more sensitive to acquisition activity than to performance. Our results suggest that agency considerations are important for both public and private acquisitions but are more important for public acquisitions.
Highlights
We estimate the effect of acquisition performance and acquisition activity on CEO compensation for the full set of CEOs of large public U.S corporations in the Execucomp database over the period 1992–2016
Based on the theoretical implications of agency theory as it applies to executive compensation, we suggest that agency distortions would be stronger for public acquisitions
As for theoretical foundations for possible different effects of public and private acquisitions, we suggest that the agency-based distortions that would weaken the link between acquisition performance and CEO compensation are stronger for public acquisitions
Summary
Provided in Cooperation with: MDPI – Multidisciplinary Digital Publishing Institute, Basel. Suggested Citation: Brander, James A.; Egan, Edward J.; Endl, Sophie (2021) : Comparing. Management, ISSN 1911-8074, MDPI, Basel, Vol 14, Iss. 4, pp. Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen. Documents in EconStor may be saved and copied for your personal and scholarly purposes. You are not to copy documents for public or commercial purposes, to exhibit the documents publicly, to make them publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Content Licence (especially Creative Commons Licences), you may exercise further usage rights as specified in the indicated licence. Sauder School of Business, University of British Columbia, Vancouver, BC V6T 1Z2, Canada
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