Sales of private firms and the role of CEO compensation

Natasha Burns, Jan Jindra and Kristina Minnick

Journal of Corporate Finance, 2017, vol. 43, issue C, 444-463

Abstract: We analyze the relation of private firms' CEO compensation with the probability of sale of a firm and its valuation at the time of the sale. Specifically, we study whether equity-based remuneration is consistent with compensating the CEO for effort related to selling the private firm, or with compensating for the illiquidity of the equity-based compensation for private firms. Using a sample of large private firms with public filings, we find that CEOs of IPO and acquired private firms have higher total and equity-based compensation than CEOs of firms that remain private. We also show that CEO compensation is positively related to the valuation premium of IPOs versus acquired firms.

Keywords: Private firms; Mergers and acquisitions; Initial public offerings; Exit; CEO compensation; IPO versus acquisition valuation; IPO valuation premium puzzle (search for similar items in EconPapers)
JEL-codes: G3 G34 (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:43:y:2017:i:c:p:444-463

DOI: 10.1016/j.jcorpfin.2017.02.004

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