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Acquisition experience and director remuneration

Author

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  • Addis Gedefaw Birhanu

    (EM - EMLyon Business School)

  • Philipp Geiler

    (Tilburg University [Tilburg] - Netspar)

  • Luc Renneboog
  • Yang Zhao

    (University of Liverpool)

Abstract

We investigate whether acquisition experience of executive and non-executive directors is priced in their remuneration contracts. Acquisition experience generates a contractual premium, and the relative size of this premium is higher for non-executive directors than for executives. Only a director's track record related to past successful acquisitions is priced. Acquisition experience of a director is not remunerated if this type of experience is already abundantly present in the firm through the firm's past acquisition record (substitution effect). We verify the results by examining potential endogeneity concerns, by analyzing a broad set of measures of acquisition experience (such as industry-specific, broad or international experience, experience on a target's board), and by ruling out alternative explanations (such as a director's general skills level or reputation, the CEO's power and delegation attitude, and the firm's corporate governance quality).

Suggested Citation

  • Addis Gedefaw Birhanu & Philipp Geiler & Luc Renneboog & Yang Zhao, 2021. "Acquisition experience and director remuneration," Post-Print hal-03265164, HAL.
    • Handle: RePEc:hal:journl:hal-03265164
    DOI: 10.1016/j.intfin.2021.101356
    Note: View the original document on HAL open archive server: https://hal.science/hal-03265164
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    Keywords

    Directors; M&A; Takeovers; Mergers; remuneration contracting; Compensation; Experience; Human capital; skills;
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