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The Impact of Mergers and Acquisitions on Executive Pay in the United Kingdom

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  • Paul Guest

Abstract

We examine the impact of acquisitions on executive pay in UK acquirers over 1984-2001. For the overall sample, which includes foreign, domestic, public and private targets, there is a significant transitory pay increase. Pay changes are not affected by target nationality or organizational form, although initial cross-border acquisitions do result in higher pay. Pay increases are higher following acquisitions of targets with high pay, but not of targets in high pay countries. CEOs are rewarded equally for bad and good acquisitions, and those well rewarded are more likely to reacquire. However, bad acquisitions do not on average increase CEO wealth because of an offsetting decline in CEO shareholding value. Pay impacts are not affected by the corporate governance characteristics of the acquiring firm.

Suggested Citation

  • Paul Guest, 2007. "The Impact of Mergers and Acquisitions on Executive Pay in the United Kingdom," Working Papers wp354, Centre for Business Research, University of Cambridge.
  • Handle: RePEc:cbr:cbrwps:wp354
    Note: PRO-2
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Ozkan, Neslihan, 2012. "Do CEOs gain more in foreign acquisitions than domestic acquisitions?," Journal of Banking & Finance, Elsevier, vol. 36(4), pages 1122-1138.
    2. Swarnodeep Homroy, 2014. "Pay increase may not be a strong incentive for undertaking acquisitions," Working Papers 66910750, Lancaster University Management School, Economics Department.
    3. Kräkel, Matthias & Müller, Daniel, 2015. "Merger efficiency and managerial incentives," International Journal of Industrial Organization, Elsevier, vol. 41(C), pages 51-63.
    4. John S. Marsh & William J. Wales & Fariss-Terry Mousa & Rachel Graefe-Anderson, 2016. "Countermove: how CEOs respond to post-acquisition compensation adjustments," Review of Managerial Science, Springer, vol. 10(4), pages 711-755, October.
    5. Matthias Kräkel & Daniel Müller, 2014. "Merger Performance and Managerial Incentives," Bonn Econ Discussion Papers bgse02_2014, University of Bonn, Germany.
    6. Andy Cosh & Paul Guest & Alan Hughes, 2007. "UK Corporate Governance and Takeover Performance," Working Papers wp357, Centre for Business Research, University of Cambridge.
    7. 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.

    More about this item

    Keywords

    Executive compensation; acquisitions; cross-border; private; corporate governance;

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • J33 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Compensation Packages; Payment Methods

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