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Is an M&A self‐dealing? Evidence on international and domestic acquisitions and CEO compensation
Author(s) -
Choi Jongmoo Jay,
Genc Omer F.,
Ju Ming
Publication year - 2020
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/jbfa.12480
Subject(s) - executive compensation , compensation (psychology) , incentive , business , principal–agent problem , reputation , stewardship (theology) , accounting , agency (philosophy) , mergers and acquisitions , industrial organization , corporate governance , microeconomics , economics , finance , psychology , law , social science , philosophy , epistemology , sociology , politics , political science , psychoanalysis
We examine the effect of international acquisitions on CEO compensation for US firms from 1995 to 2016 using both domestic acquisition and no acquisition firms as benchmarks. We find that acquisitions lead to a greater increase in CEO compensation (especially incentive‐based compensation), which is consistent with agency theory and inconsistent with stewardship or reputation theory. We also find that international acquisitions lead to a greater increase in CEO incentive‐based compensation than domestic acquisitions, supporting matching theory given that international acquisitions are larger and more complex to manage. Additionally, we document that CEO tenure has a positive effect on CEO compensation, whereas firm relatedness has a negative effect on post‐acquisition CEO compensation. This is the first study of its type based on comprehensive data, and it contributes to our understanding of the role of international and domestic acquisitions in CEO compensation.