One size fits all? The effectiveness of incentive compensation in public acquisitions

Tsekeris, A. ORCID: 0000-0003-3289-5235, McColgan, P. and Hillier, D., 2018. One size fits all? The effectiveness of incentive compensation in public acquisitions. In: European Financial Management Association Annual Meeting, Università Cattolica del Sacro Cuore, Milan, Italy, 27-30 June 2018.

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Abstract

This paper provides new evidence on the relation between incentive compensation and acquisition performance. We find that higher sensitivity of executives’ wealth to stock-price changes, Delta, is positively associated with post-acquisition stock-price performance and that higher sensitivity of executives’ wealth to stock-return volatility, Vega, leads to risk-increasing acquisitions only when the target is a non-publicly listed firm. In public deals, we find no difference in the deal synergies available to acquiring firm’s shareholders between high and low incentivised managers and no relation between incentive compensation and the quality of M&A decisions in terms of risk and stock-price returns. Our results are robust to a number of deal and firm characteristics and to controls for selection bias and endogeneity. Our findings suggest that when a publicly listed firm is acquired, the increased negotiation power of the target and information asymmetry considerations offset the positive impact of incentive compensation on both stock-price performance and risk-taking.

Item Type:	Conference contribution
Creators:	Tsekeris, A., McColgan, P. and Hillier, D.
Date:	2018
Divisions:	Schools > Nottingham Business School
Record created by:	Jonathan Gallacher
Date Added:	14 Nov 2018 09:49
Last Modified:	14 Nov 2018 09:49
URI:	https://irep.ntu.ac.uk/id/eprint/34960

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