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| Author | : Shu-Ling Wang (Student.) |
| Publisher | : |
| Total Pages | : 120 |
| Release | : 1993 |
| Genre | : Compensation management |
| ISBN | : |
| Author | : Athanasios Tsekeris |
| Publisher | : |
| Total Pages | : 0 |
| Release | : 2015 |
| Genre | : |
| ISBN | : |
This thesis examines the impact of executive compensation on the quality of corporate acquisition decisions. A number of different issues are empirically investigated. The analysis begins with the examination of the relation between the incentives managers are provided with via their compensation contracts and the riskiness of mergers and acquisitions (M&As) investigating whether this relation is affected by the passage of the Sarbanes-Oxley Act (SOX) in 2002. The study then focuses on the performance of acquiring firms exploring how and whether managerial incentives can induce value-increasing acquisitions conditional on the intensity of M&A activity. The final part of the empirical analysis examines whether the legal status of the target firm has any implications for the effectiveness of incentive compensation to mitigate managerial risk-aversion and increase shareholder value. The thesis contributes both to academic literature and to practice by identifying areas of inefficiencies of equity-based compensation contracts to mitigate agency costs. More specifically, new evidence is provided on the effectiveness of incentive compensation to induce risk-taking activity under the impact of stricter regulation. While compensation-related incentives are positively associated with the riskiness of acquisition decisions before 2002, managers have become considerably less responsive to such incentives after the enactment of SOX. Moreover, although incentive compensation can improve deal performance and overcome adverse selection concerns by inducing managers to acquire when it is optimal to do, it is not related to value-increasing decisions when acquisitions are initiated during periods of merger waves. It is further found that equity-based compensation can be rendered ineffective to mitigate agency costs when a publicly listed firm is acquired. Given these inefficiencies, a number of recommendations are made for the improvement of the design of executive compensation contracts that could provide valuable guidelines to remuneration committees to reduce excessive compensation costs and benefit shareholders.
| Author | : David Tsui |
| Publisher | : |
| Total Pages | : 59 |
| Release | : 2018 |
| Genre | : |
| ISBN | : |
I examine the relation between shareholder value and managerial risk-taking and how this value-risk tradeoff influences managers' incentive compensation packages. I find that shareholder value increases with risk and therefore managerial risk aversion creates potential agency conflicts between managers and shareholders. I also find that firms provide managers with stronger risk-taking incentives when value-risk tradeoffs are steeper (i.e., the marginal benefit of risk-taking is greater) and therefore potential risk-related agency costs are more severe, particularly when shareholder value increases with idiosyncratic (rather than systematic) risk and managers are more risk-averse. Collectively, these results suggest that firms deliberately provide managers with risk-taking incentives to address risk-related agency conflicts and these incentives do not encourage widespread “excessive” risk-taking. I also provide an explanation for conflicting prior evidence on the incentive effects of managers' stock holdings by showing that these incentives vary based on firms' value-risk tradeoffs.
| Author | : Virginia Bodolica |
| Publisher | : Routledge |
| Total Pages | : 246 |
| Release | : 2015-06-26 |
| Genre | : Business & Economics |
| ISBN | : 1317624319 |
Over the past decades, the total value of executive compensation packages has been rising dramatically, contributing to a wider pay gap between the chief executive officer and the average worker. In the midst of the financial turmoil that brought about a massive wave of corporate failures, the lavish executive compensation package has come under an intense spotlight. Public pressure has mounted to revise the levels and the structure of executive pay in a way that will tie more closely the executive wealth to that of shareholders. Merger and acquisition (M&A) activities represent an opportune setting for gauging whether shareholder value creation or managerial opportunism guides executive compensation. M&As constitute major examples of high-profile events prompted by managers who typically conceive them as a means for achieving higher levels of pay, even though they are frequently associated with disappointing returns to acquiring shareholders. Mergers and Acquisitions and Executive Compensation reviews the existing empirical evidence and provides an integrative framework for the growing body of literature that is situated at the intersection of two highly debated topics: M&A activities and executive compensation. The proposed framework structures the literature along two dimensions, such as M&A phases and firm’s role in a M&A deal, allowing readers to identify three main streams of research and five different conceptualizations of causal relationships between M&A transactions and executive compensation. The book makes a comprehensive review of empirical studies conducted to date, aiming to shed more light on the current and emerging knowledge in this field of investigation, discuss the inconsistencies encountered within each stream of research, and suggest promising directions for further exploration. This book will appeal to researchers and students alike in the fields of organizational behavior and governance as well as accounting and accountability.
| Author | : Scott McKnight |
| Publisher | : |
| Total Pages | : 60 |
| Release | : 2016 |
| Genre | : |
| ISBN | : |
We provide new evidence that equity incentives can have perverse effects on firm value. Conditioning the relationship between chief executive officer (CEO) incentives and the risk exposure generated by corporate policy decisions on how risk is expected to affect firm value, we find that delta encourages value-maximising investment and firm focus policy decisions, but may lead to sub-optimal financing decisions. When the goal of value-maximisation conflicts with the CEO's propensity to avoid risk, the incentive effect of delta partially offsets risk aversion. We show that while CEO incentives affect corporate policy, the firm's optimal policy also influences the compensation contract.
| Author | : Naveen D. Daniel |
| Publisher | : |
| Total Pages | : 38 |
| Release | : 2014 |
| Genre | : |
| ISBN | : |
We examine how incentives embedded in managerial compensation contracts are priced by the bond and stock markets. Specifically, the incentives we consider are the sensitivity of CEO wealth to stock price (delta) and the sensitivity of CEO wealth to stock-return volatility (vega). Controlling for other determinants, we find that higher levels of both vega and delta are associated with higher bond credit spreads and higher expected stock returns. In addition to having a direct effect on credit spreads and expected stock returns, higher incentives are also associated with lower average cash flows, higher volatility of cash flows, and higher volatility of stock returns (all of which increase credit spreads), and higher systematic risk (which increases expected stock return). Thus, higher incentives have a cascading effect on credit spreads and expected stock returns. Also, a portfolio of high-incentive firms significantly underperforms a portfolio of low-incentive firms on a risk-adjusted basis; thus, on average shareholders appear to be harmed ex post as a result of incentive provision.
| Author | : David Scott North |
| Publisher | : |
| Total Pages | : 252 |
| Release | : 2000 |
| Genre | : Consolidation and merger of corporations |
| ISBN | : |
| Author | : FACTSET MERGERSTAT. |
| Publisher | : BVResources |
| Total Pages | : |
| Release | : 2020-04-25 |
| Genre | : |
| ISBN | : 9781621501954 |
The FactSet Mergerstat Review is the cornerstone of any mergers and acquisitions library. This must-have resource delivers comprehensive rosters, data and statistics on merger and acquisition (M&A) transactions that involve U.S. companies, including privately held, publicly traded and cross-border transactions, and also lists unit divestitures, management buyouts, and certain asset sales.
| Author | : |
| Publisher | : |
| Total Pages | : |
| Release | : 2006 |
| Genre | : Consolidation and merger of corporations |
| ISBN | : |
This study examines the relationship between managerial equity incentives and takeover wealth gains both for target and acquirer firms. Although there is some research about the effect of acquirer managers' incentives on acquirer wealth gains, this paper is one of the first to investigate the effect of target managers' incentives on the wealth effects of target firms in corporate takeovers. In addition, prior research has focused on the alignment effect of equity incentives in takeovers. However, takeovers provide an opportunity to liquidate personal equity portfolio for managers who hold an undiversified portfolio of their firms' stock. In this study, I identify two hypotheses that potentially explain the effect of target managers' incentives on wealth gains. While incentive alignment hypothesis predicts a positive relationship, diversification driven-liquidity hypothesis predicts a negative relationship between target managerial incentives and target wealth gains. I use a sample of 656 successful and 104 failed acquisitions over the period 1994-2003 to test these competing hypotheses. I find that for targets that are less (more) diversified, equity incentives are negatively (positively) related to wealth effects. I also find that the target managerial incentives increase the success probability of a takeover bid and this positive effect is less pronounced for diversified target managers. Based on these results, I conclude that incentive alignment argument is dominated by liquidity argument in less diversified target firms, however, holds in diversified firms. For acquirer managers, I do not find any evidence that supports incentive alignment or diversification arguments.
