CEO Compensation and Bank Mergers

35 Pages Posted: 28 Mar 2000

See all articles by Richard T. Bliss

Richard T. Bliss

Babson College - Finance Division

Richard J. Rosen

Federal Reserve Bank of Chicago - Economic Research

Date Written: February 2000

Abstract

Recent bank mergers generally did not improve relative operating performance or produce positive abnormal returns to acquiring bank shareholders. We examine the relationship between mergers and CEO compensation during 1986-1995, a period marked by overcapacity and frequent mergers. We find that mergers have a net positive effect on compensation, mainly via the effect of size on compensation. Compensation generally increases even if mergers cause the acquiring bank's stock price to decline, as is typical after a merger announcement. The form of compensation affects merger decisions, since CEOs with more stock-based wealth or compensation were less likely to make an acquisition.

JEL Classification: G21, G34

Suggested Citation

Bliss, Richard T. and Rosen, Richard J., CEO Compensation and Bank Mergers (February 2000). Available at SSRN: https://ssrn.com/abstract=210908 or http://dx.doi.org/10.2139/ssrn.210908

Richard T. Bliss

Babson College - Finance Division ( email )

Babson Park, MA 02457-0310
United States
781-239-5883 (Phone)
781-239-6465 (Fax)

Richard J. Rosen (Contact Author)

Federal Reserve Bank of Chicago - Economic Research ( email )

230 South LaSalle Street
Chicago, IL 60604
United States
312-322-6368 (Phone)
312-294-6262 (Fax)

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