Incentive compensation vs SOX: evidence from corporate acquisition decisions

McColgan, P., Hillier, D., Tsekeris, A. ORCID: 0000-0003-3289-5235 and Presthus, A.S., 2014. Incentive compensation vs SOX: evidence from corporate acquisition decisions. In: Financial Management Association European Conference 2014, Maastricht, Netherlands, 11-13 June 2014.

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In this paper, we use the introduction of the Sarbanes-Oxley Act in 2002 to assess the impact of executive option and stock grants on corporate acquisition decisions. Amongst its many innovations, the Sarbanes-Oxley Act (SOX) has limited the value and effect of equity-related compensation. We find strong evidence of a shift in the factors driving acquisitions post-SOX. Specifically, while bid premiums have fell irrespectively of the type of acquirer, highly incentivised managers have become more risk-averse after the passage of the Act. Investors also appear to have recognised the effect of a change in equity-related pay. Both market response to acquisition announcements and post-acquisition performance have been improved after the introduction of SOX but these cannot be attributed to firms that grant high levels of incentive compensation to their managers. Our results are robust to a number of explanatory factors and confounding events in the post-SOX period.

Item Type: Conference contribution
Creators: McColgan, P., Hillier, D., Tsekeris, A. and Presthus, A.S.
Date: June 2014
Divisions: Schools > Nottingham Business School
Record created by: Jonathan Gallacher
Date Added: 08 Jan 2018 11:17
Last Modified: 28 Mar 2018 09:48

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