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Access Type
WSU Access
Date of Award
January 2022
Degree Type
Dissertation
Degree Name
Ph.D.
Department
Economics
First Advisor
Young-Ro Yoon
Abstract
This study explores CEO compensation sensitivity to the acquiring firm’s risk and performance. It also examines the impact of acquisitions on CEO compensation, employing one of the largest datasets on M&As. Our sample consists of 4110 completed bids for publicly traded U.S. firms over the 2007-2016 period. We find that M&As significantly increase CEO compensation. The positive M&A impact on CEO compensation is much higher in large and more complex deals. We split the sample into firms that pay high cash-based compensation (HCBC) and firms that pay high equity-based compensation (HEBC) and find that HEBC firms adopt larger and more complex deals, and their CEO compensation is more sensitive to the firm risk and performance. The results show that CEO compensation is strongly affected by the negative stock return in HEBC firms but not in the HCBC firms. Moreover, we find that the measures of skills and effort can explain the CEO compensation in the acquisition year. Our analysis shows that CEO power plays a role in determining their compensation. We find a positive relationship between CEO tenure and bonus. Moreover, we find the CEO/Chairman duality positively associated with CEO total compensation and CEO bonus. We investigate the corporate governance effect on different forms of CEO compensation in the year of acquisition. We find that boards with a higher independent director ratio tend to decrease the CEO bonus even though they tend to increase the CEO total pay. Finally, we investigate the market reaction to different corporate governance aspects in the acquisition year. We find that the market reacts negatively to the CEO/Chairman duality at the acquisition announcement. Moreover, we find a negative association between the board size and CAR (cumulative abnormal return).
Recommended Citation
Alhazmi, Asma, "Ceo Compensation Sensitivity To Performance During M&as For Hcbc Versus Hebc Firms" (2022). Wayne State University Dissertations. 3747.
https://digitalcommons.wayne.edu/oa_dissertations/3747