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Acquisition Premiums of Executive Compensation in China: a Matching View

Lili Kang and Fei Peng

MPRA Paper from University Library of Munich, Germany

Abstract: More aggressive acquiring firms paid higher executive compensation than non or less aggressive acquiring firms. This paper applies the generalized propensity score (GPS) methodology to estimate the relationship between a firm’s acquisition and its executive compensation. Allowing for continuous treatment, that is, different levels of the firms’ acquisition activities, we apply the GPS method on a panel data set of Chinese Public Listed Companies (PLCs) and find that there is a causal effect of firms’ acquisition activities on executive compensation. However, there is a divergent interests between the board directors and executive managers which may bring serious agency problem in the acquisition decision. The self-selection effect plays a dominant role in the acquisition premiums of top 3 board directors, while the learning-by-acquiring effect on compensation is more prominent for executive managers than board directors. As the executive managers as a whole, can benefit more executive management positions as well as higher growth of executive compensation from aggressive acquisition than board directors and top 3 executive managers.

Keywords: Acquisition Decision; Executive Compensation; Generalized Propensity Score; Agency problem (search for similar items in EconPapers)
JEL-codes: C14 G34 J33 M12 (search for similar items in EconPapers)
Date: 2014-04
New Economics Papers: this item is included in nep-bec, nep-cdm, nep-hrm and nep-tra
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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