Do Corporate Acquisitions Influence CEO Compensation? Empirical Evidence from Continental Europe

Abstract

This paper investigates the impact of corporate acquisitions on CEO compensation and CEO turnover of family firms in Continental Europe. We find that CEOs in family firms do not experience an increase in their compensation during the post-acquisition period, while there is a positive and statistically significant association between the compensation of CEOs in non-family firms and their acquisition activity. This finding is consistent with the view that controlling family shareholders provide monitoring for CEOs mitigating managerial agency problems that arise from the separation of ownership and control. Further, we find that the likelihood of CEO turnover declines following an acquisition in non-family firms, suggesting that these acquiring CEOs do not face a higher likelihood of dismissal while they receive a higher level of compensation. In contrast, there is no significant impact of acquisitions on CEO turnover in family firms.