Impact of Acquisition on CEO Pay
Citation
HomRoy, S. (2012) Impact of Acquisition on CEO Pay, Journal of Business and Economic Statistics, , , ,
Abstract
We examine the impact of acquisition on the pay of CEOs of S&P 1500 _rms from 1994-2010.
We _nd insigni_cant e_ect of _rm performance on post-acquisition CEO pay. Controlling for _rm
size, CEOs are paid about 3.5-4% premium in post-acquisition pay, which increases the pay of
the median CEO of an acquiring _rm in the sample by US$ 1,73,000. We _nd no evidence of
di_erential pay increase for domestic and international acquisitions. Post-acquisition increase in
CEO pay is not contingent on the wealth e_ects and CEOs are not penalized for _wealth-reducing_
acquisitions. Our results suggest that a part of acquisition premium in CEO pay can be attributed
to the strength of governance. Controlling for survivor bias, we observe a smaller acquisition
premium in CEO pay.