Merger Activity and Executive Pay

Sourafel Girma (), Steve Thompson and Peter William Wright ()
Additional contact information
Steve Thompson: University of Leicester

No 87, Royal Economic Society Annual Conference 2002 from Royal Economic Society

Abstract: This paper examines the impact of mergers and acquisitions on the remuneration of the CEOs in a large unbalanced panel of UK firms, over the period 1981-1996. We find significant and substantial executive pay increases in excess of those generated by the growth in firm size consequent upon the merger. This is consistent with the view that mergers reveal information about the quality of management that is useful to the firm's remuneration committee. However, executive pay is nine times more sensitive to internal growth than to growth as a result of acquisition. Furthermore, there is some evidence that hostile transactions generate smaller pay effects than friendly deals, probably because they are followed, at some remove, by size-reducing divestments. When mergers are distinguished by their impact on shareholder wealth we find that CEOs engaging in 'bad' (ie 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 penalising managers for unwarranted empire-building mergers.

Date: 2002-08-29
View citations in EconPapers

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Working Paper: Merger Activity and Executive Pay (2002)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: http://EconPapers.repec.org/RePEc:ecj:ac2002:87

Access Statistics for this paper

More papers in Royal Economic Society Annual Conference 2002 from Royal Economic Society
Contact information at EDIRC.
Series data maintained by Christopher F. Baum ().