Governance structures and the compensation of powerful corporate leaders in financial firms during M&As

Agyei-Boapeah, Henry, Ntim, Collins G and Fosu, Samuel (2019) Governance structures and the compensation of powerful corporate leaders in financial firms during M&As. Journal of International Accounting, Auditing and Taxation, 37. a100285 1-20. ISSN 1061-9518

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Abstract

We examine the impact of mergers and acquisitions (M&As) on the compensation of powerful corporate leaders [i.e., boards of directors, including Chief Executives Officers (CEOs), Chief Financial Officers (CFOs), and Board Chairs] of acquiring firms. Using one of the largest datasets on M&As, directors’ compensation, and governance to-date, consisting of a sample of UK financials (banks, insurance firms, private equity firms, and speciality finance firms) over a 13-year period, our results obtained by employing multivariate regression analyses show that acquisitions, on average, have a positive and significant impact on directors’ compensation. This effect applies to both powerful corporate executives (CEOs, CFOs, and all other executive directors) and other non-executive directors. However, the positive acquisition effect on top executive compensation is much higher in larger and more complex acquisitions. We also find that much of the acquisition-related pay raises is equity-based rather than cash-based. Finally, we find CEOs to be the top beneficiaries from acquisitions. We interpret our findings within a multi-theoretical framework that draws insights from agency, executive power, managerial talent, and tournament theories of top executive compensation.

Item Type: Article
Keywords: M&As, CEOs, Board of Directors, Executive compensation, Corporate governance, Financial firms, UK
Schools and Departments: University of Sussex Business School > Accounting and Finance
SWORD Depositor: Mx Elements Account
Depositing User: Mx Elements Account
Date Deposited: 11 May 2022 08:53
Last Modified: 11 May 2022 09:00
URI: http://sro.sussex.ac.uk/id/eprint/105818

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