McColgan, P, Hillier, D and Tsekeris, A ORCID: https://orcid.org/0000-0003-3289-5235, 2014. Incentive compensation vs. SOX: evidence from corporate acquisition decisions. In: Financial Management Association Annual Meeting 2014, Nashville, Tennessee, USA, 15-18 October 2014.
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Abstract
We empirically examine the impact of incentive compensation on the riskiness of acquisition decisions before and after the passage of Sarbanes-Oxley Act (SOX). Controlling for confounding events, firm characteristics and industry fixed effects, we find a substantial change in the relation between equity-related compensation and acquisition risk post-SOX stemming from a previously unidentified shift in the effectiveness of executive stock options to control managerial risk aversion. Not only has incentive compensation failed to offset the adverse impact of SOX on risk-taking activity but it has also significantly altered managerial incentives. The decrease in acquisition risk post-SOX cannot be solely attributed to changes in the structure of executive compensation but it additionally stems from the way managers perceive compensation-based incentives in the new regulatory environment. The results are robust to different measures of acquisition risk and alternative definitions of incentive compensation.
Item Type: | Conference contribution |
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Creators: | McColgan, P., Hillier, D. and Tsekeris, A. |
Date: | October 2014 |
Divisions: | Schools > Nottingham Business School |
Record created by: | Linda Sullivan |
Date Added: | 06 Nov 2017 10:48 |
Last Modified: | 06 Nov 2017 10:48 |
URI: | https://irep.ntu.ac.uk/id/eprint/31974 |
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