Impact of Acquisition on CEO Pay

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.