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Executive compensation effects of large corporate acquisitions

Authors
Journal
Journal of Accounting and Public Policy
0278-4254
Publisher
Elsevier
Publication Date
Volume
6
Issue
4
Identifiers
DOI: 10.1016/s0278-4254(87)80001-7
Disciplines
  • Law

Abstract

This paper examines whether the changes in managerial compensation and wealth associated with an acquisition are independent of the acquisition's effect on the stock price of the acquiring firm. We find that real (inflation-adjusted) increases in compensation and wealth are observed only if an executive selects an acquisition which increases shareholder wealth. Moreover, the differential impact of the acquisition on the compensation and wealth of the top executives (especially the Chief Executive Officer) as a function of the sign of the acquisition's effect on shareholder wealth is statistically significant.

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