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Merger and acquisition related determinants of executive compensation arrangements' adoption

Author

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  • Virginia Bodolica
  • Michel Magnan
  • Martin Spraggon

Abstract

Previous research has investigated the links between Mergers and Acquisitions (M&As) and the monetary magnitude of executive compensation, but failed to inquire how the adoption of specific attributes of compensation contacts relates to M&A activities. We address this gap in the literature by examining the impacts of some M&A characteristics and acquirers' features on the adoption of executive compensation protection provisions and new Long-Term Incentive Plans (LTIPs). The study adopts a longitudinal design before–after M&A deals for 80 Canadian acquiring companies that engaged in M&A activities between 1995 and 2001. Our findings suggest that both transactional and organisational characteristics significantly explain the executive compensation arrangements' adoption around M&A transactions, but that the adoption of new LTIPs is subjected to a different set of determinants than the adoption of compensation protection provisions. We interpret these results in the light of the agency, political and institutional perspectives.

Suggested Citation

  • Virginia Bodolica & Michel Magnan & Martin Spraggon, 2007. "Merger and acquisition related determinants of executive compensation arrangements' adoption," International Journal of Business Governance and Ethics, Inderscience Enterprises Ltd, vol. 3(4), pages 407-429.
    • Handle: RePEc:ids:ijbget:v:3:y:2007:i:4:p:407-429
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