Is an M&amp;A self‐dealing? Evidence on international and domestic acquisitions and CEO compensation

Choi, Jongmoo Jay; Genc, Omer Faruk; Ju, Ming

doi:10.1111/jbfa.12480

Cited by 9 publications

(6 citation statements)

References 91 publications

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“…Our paper is structurally similar to Choi et al (2020), although the specific research question differs. Choi et al (2020) compare the differential CEO compensation effect of domestic (U.S.) and international acquisitions, whereas we compare public and private acquisitions.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 95%

“…Choi et al (2020) compare the differential CEO compensation effect of domestic (U.S.) and international acquisitions, whereas we compare public and private acquisitions. The biggest difference in method is that Choi et al (2020) focus on the effect of acquisition activity on compensation, whereas we focus on both acquisition activity and acquisition performance as measured by stock market returns.…”

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

“…Our other treatment variables are acquisition activity variables. As noted by Choi et al (2020), it is possible that acquisition activity might be endogenous. For example, CEOs with more aggressive personalities may be more successful in obtaining compensation increases and may also be more inclined to make acquisitions.…”

Section: Endogeneity and Instrumental Variablesmentioning

confidence: 99%

“…In other words, agency considerations might allow CEOs to take advantage of the acquisition process to raise their compensation even when acquisitions do not raise shareholder value. Thus, acquisition activity might represent "self-dealing" by CEOs who seek to raise their own compensation, as suggested by the results of Choi et al (2020), among others. Our innovation in this paper is to investigate whether such effects are stronger for public than for private acquisitions, consistent with our hypothesis that public acquisitions are more prone to agency effects.…”

Section: Introductionmentioning

confidence: 97%

See 3 more Smart Citations

Comparing CEO Compensation Effects of Public and Private Acquisitions

Brander

Egan²,

Endl

2021

JRFM

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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 (using 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 positive effect on compensation. Our main results suggest that agency considerations are important for both public and private acquisitions but are more important for public acquisitions.

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Section: Literature Review and Hypothesis Developmentmentioning

confidence: 95%

Section: Literature Review and Hypothesis Developmentmentioning

confidence: 99%

Section: Endogeneity and Instrumental Variablesmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 97%

See 2 more Smart Citations

Comparing CEO Compensation Effects of Public and Private Acquisitions

Brander

Egan²,

Endl

2021

JRFM

View full text Add to dashboard Cite

show abstract

“…We use the ExecuComp variable TDC 1 as the measure of total CEO compensation. Following prior studies (see, e.g., J. J. Choi et al., 2020; Sloan, 1993; Vefeas, 2003), we log transform the measure to control for skewness in the CEO compensation distribution. CEO total compensation includes the CEO's base salary, bonus, other annual compensation, the total value of restricted stock granted, the total value of stock options granted (valued using Black–Scholes), long‐term incentive payouts and all other compensation.…”

Section: Sample Selection and Research Designmentioning

confidence: 99%

Internal control material weakness and CEO recruitment

Khurana

Kyung

2021

Business Fin & Account

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Prior research finds that internal control material weakness (ICMW) reduces the reliability of financial reporting numbers, imposes costs on firms and affects firm performance. Given these effects, we examine two research questions: Does the disclosure of ICMW hamper a firm's ability to hire high‐ability CEOs? Consequentially, does it also impact CEO contracting in terms of the compensation offered to newly hired CEOs? We provide three key findings. First, we find firms that disclose ICMW are more likely to appoint CEOs with lower managerial ability relative to firms that do not disclose ICMW. Second, we find ICMW firms offer lower compensation to new CEOs, suggesting that the pay offered is commensurate with the ability of the CEO recruited. However, the negative relation between ICMW and compensation is attenuated for individual CEOs with relatively higher abilities. Further analyses reveal that some high‐ability CEOs do take positions at ICMW firms, but these ICMW firms pay a premium to hire them, which contributes to greater dispersion and disparity in pay among the top‐five executives. Overall, our results point to ICMW imposing labor market consequences in terms of firm recruitment of high‐ability CEOs.

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Information design for weighted voting

Kerman,

Tenev

2024

Econ Theory

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We consider a sender who wishes to persuade multiple receivers to vote in favor of a proposal and sends them private correlated messages that are conditional on the true state of the world. The receivers share a common prior, wish to implement the outcome that matches the true state, and have homogeneous preferences. However, they are heterogeneous in their voting weights. We consider both behavioral and sophisticated voters. When voters are behavioral, public communication is optimal if and only if there is a veto player. For sophisticated voters, we establish lower bounds on the sender’s gain from persuasion for general voting quotas and show that the sender can often improve upon public communication. Finally, in an extension, we show that even when behavioral voters have heterogeneous prior beliefs, public communication is optimal if and only if there is a veto player.

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Is an M&A self‐dealing? Evidence on international and domestic acquisitions and CEO compensation

Cited by 9 publications

References 91 publications

Comparing CEO Compensation Effects of Public and Private Acquisitions

Comparing CEO Compensation Effects of Public and Private Acquisitions

Internal control material weakness and CEO recruitment

Information design for weighted voting

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