In this chapter we investigate how the structure of a CEO’s compensation package – and especially his bonus and equity-based compensation (EBC) – influences his M & A decisions. We find that a CEO with a higher proportion of EBC is more likely to initiate (serial) acquisitions. Likewise, a CEO who receives a larger bonus is more eager to be involved in takeovers. We argue that equity-based compensation along with strong performance requirements (stock options and restricted stock become vested only if specific performance criteria are met) induce managers to adopt aggressive growth strategies through M & As. Large outside shareholders reduce a firm’s takeover activity, which is also the case when a CEO holds a significant equity stake.
|Title of host publication||The Research Handbook on Shareholder Power|
|Editors||J. Hill, R. Thomas|
|Place of Publication||Cheltenham|
|Publisher||Edward Elgar Publishing Ltd.|
|Publication status||Published - 31 Jul 2015|
|Name||Research Handbooks in Corporate Law and Governance Series|
Pikulina, E. S., & Renneboog, L. D. R. (2015). Serial takeovers, large shareholders, and CEOs’ equity-based compensation. In J. Hill, & R. Thomas (Eds.), The Research Handbook on Shareholder Power (pp. 297-318). (Research Handbooks in Corporate Law and Governance Series). Edward Elgar Publishing Ltd.. https://doi.org/10.4337/9781782546856.00028