Does equity-based compensation make CEOs more acquisitive?

TJ Boulton, M Braga-Alves, Frederik Schlingemann

Research output: Contribution to journalArticleAcademicpeer-review

8 Citations (Scopus)

Abstract

Theory is conflicted on the impact of equity-based compensation on managerial risk taking. We explore this issue by studying the relation between equity-based compensation and firms' propensity to make acquisitions. Consistent with the notion that equity-based compensation encourages managerial risk taking, we report a positive relation between equity-based compensation and CEO acquisitiveness. Additionally, we find that the number of acquisitions, acquisition size, use of equity as payment, and propensity to acquire private firms are all positively associated with equity-based compensation. Abnormal returns around acquisition announcements suggest that the impact of equity-based compensation is not uniformly positive for acquiring-firm shareholders.
Original languageEnglish
Pages (from-to)267-294
Number of pages28
JournalThe Journal of Financial Research
Volume37
Issue number3
DOIs
Publication statusPublished - 2014

Research programs

  • RSM F&A

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