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The Impact of Merger Activity on Executive Pay in the United Kingdom

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  • SOURAFEL GIRMA
  • STEVE THOMPSON
  • PETER W. WRIGHT

Abstract

We examine the impact of mergers and acquisitions on the remuneration of CEOs in the UK from 1981 to 1996. We find that CEO pay is not strongly related to company performance. In contrast, increases in firm size do have a significant impact. There is also evidence that acquisitions offer CEOs the scope to influence their pay positively. We also note however that CEOs engaging in 'wealth-reducing' acquisitions experience significantly lower remuneration than their counterparts whose deals meet with market approval. This result suggests that shareholder-principals have at least some success in penalizing managers for unwarranted, empire-building, mergers. Copyright (c) The London School of Economics and Political Science 2006.

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Bibliographic Info

Article provided by London School of Economics and Political Science in its journal Economica.

Volume (Year): 73 (2006)
Issue (Month): 290 (05)
Pages: 321-339

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Handle: RePEc:bla:econom:v:73:y:2006:i:290:p:321-339

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Cited by:
  1. Papa, Gianluca & Speciale, Biagio, 2011. "Financial leverage and managerial compensation: Evidence from the UK," Research in Economics, Elsevier, vol. 65(1), pages 36-46, March.
  2. Kräkel, Matthias & Müller, Daniel, 2013. "Merger Efficiency and Managerial Incentives," Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems 410, Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich.
  3. Kräkel, Matthias & Müller, Daniel, 2013. "Bad Mergers Revisited: An Incentive Perspective," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79914, Verein für Socialpolitik / German Economic Association.
  4. Ozkan, Neslihan, 2012. "Do CEOs gain more in foreign acquisitions than domestic acquisitions?," Journal of Banking & Finance, Elsevier, vol. 36(4), pages 1122-1138.

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