THE EFFECTS OF MUTUAL FUNDS ON M&A COMPENSATION
Patty Bick and
Matthew D. Crook
Journal of Financial Research, 2018, vol. 41, issue 1, 67-89
Motivated by shareholdersâ€™ interest in combating executive wealth expropriation through the merger and acqusition (M&A) process, we study how mutual funds influence firm behavior around an acquisition through votes against management proposals. We find that mutual funds reduce the chief executive officer's ability to extract rents during the M&A process by voting against managementâ€ sponsored compensation proposals after the acquisition, thus lowering both excess compensation and increasing payâ€ forâ€ performance sensitivity. Furthermore, mutual fund voting magnifies the impact on negatively performing firms and firms with a larger amount of the mutual fund's holdings in the firm.
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfnres:v:41:y:2018:i:1:p:67-89
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