Is an M&A Self‐Dealing? Evidence on International and Domestic Acquisitions and CEO Compensation

26 Pages Posted: 23 Nov 2020

See all articles by Jongmoo Jay Choi

Jongmoo Jay Choi

Temple University; National Bureau of Economic Research (NBER); Temple University - International Business

Omer Genc

Health Science University - Department of Cardiology

Ming Ju

Louisiana Tech University - College of Business

Date Written: October-November 2020

Abstract

We examine the effect of international acquisitions on CEO compensation for US firms from 1995 to 2016 using both domestic acquisition and no acquisition firms as benchmarks. We find that acquisitions lead to a greater increase in CEO compensation (especially incentive‐based compensation), which is consistent with agency theory and inconsistent with stewardship or reputation theory. We also find that international acquisitions lead to a greater increase in CEO incentive‐based compensation than domestic acquisitions, supporting matching theory given that international acquisitions are larger and more complex to manage. Additionally, we document that CEO tenure has a positive effect on CEO compensation, whereas firm relatedness has a negative effect on post‐acquisition CEO compensation. This is the first study of its type based on comprehensive data, and it contributes to our understanding of the role of international and domestic acquisitions in CEO compensation.

Keywords: agency theory, CEO compensation, corporate complexity, corporate diversification, global mergers and acquisitions, multinational corporations

Suggested Citation

Choi, Jongmoo Jay and Genc, Omer and Ju, Ming, Is an M&A Self‐Dealing? Evidence on International and Domestic Acquisitions and CEO Compensation (October-November 2020). Journal of Business Finance & Accounting, Vol. 47, Issue 9-10, pp. 1290-1315, 2020, Available at SSRN: https://ssrn.com/abstract=3734974 or http://dx.doi.org/10.1111/jbfa.12480

Jongmoo Jay Choi

Temple University ( email )

Fox School of Business
Temple University
Philadelphia, PA 19122
United States
215-204-5084 (Phone)
215-204-1697 (Fax)

HOME PAGE: http://astro.temple.edu/~jjchoi

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Temple University - International Business ( email )

Philadelphia, PA 19122
United States

Omer Genc (Contact Author)

Health Science University - Department of Cardiology

Ankara
Turkey

Ming Ju

Louisiana Tech University - College of Business ( email )

Railload and College Ave.
Ruston, LA 71272
United States

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