Merger and acquisition related determinants of executive compensation arrangements' adoption

Virginia Bodolica, Michel Magnan and Martin Spraggon

International Journal of Business Governance and Ethics, 2007, vol. 3, issue 4, 407-429

Abstract: Previous research has investigated the links between Mergers and Acquisitions (M&As) and the monetary magnitude of executive compensation, but failed to inquire how the adoption of specific attributes of compensation contacts relates to M&A activities. We address this gap in the literature by examining the impacts of some M&A characteristics and acquirers' features on the adoption of executive compensation protection provisions and new Long-Term Incentive Plans (LTIPs). The study adopts a longitudinal design before–after M&A deals for 80 Canadian acquiring companies that engaged in M&A activities between 1995 and 2001. Our findings suggest that both transactional and organisational characteristics significantly explain the executive compensation arrangements' adoption around M&A transactions, but that the adoption of new LTIPs is subjected to a different set of determinants than the adoption of compensation protection provisions. We interpret these results in the light of the agency, political and institutional perspectives.

Keywords: corporate governance; executive compensation; employment agreement; termination clause; change of control clause; new LTIPs; M&As; mergers and acquisitions; method of payment; control premium; business governance; Canada. (search for similar items in EconPapers)
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijbget:v:3:y:2007:i:4:p:407-429

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