Pay for Performance? CEO Compensation and Acquirer Returns in BHCs

• 成果类型: Article
• 署名作者: Minnick, Kristina; Unal, Haluk; Yang, Liu
• 署名单位: Bentley University; University System of Maryland; University of Maryland College Park; University of California System; University of California Los Angeles
• 刊物名称: REVIEW OF FINANCIAL STUDIES
• ISSN/ISSBN: 0893-9454
• DOI: 10.1093/rfs/hhq107
• 发表日期: 2011
• 页码: 439
• 关键词: mergers; gains; valuation

摘要

We examine how managerial incentives affect acquisition decisions in the banking industry. We find that higher pay-for-performance sensitivity (PPS) leads to value-enhancing acquisitions. Banks whose CEOs have higher PPS have significantly better abnormal stock returns around the time of the acquisition announcements. On average, acquirers in the high-PPS group outperform their counterparts in the low-PPS group by 1.4% in a three-day window around the announcement. Higher PPS helps reduce the incentives for making value-destroying acquisitions, while at the same time promotes value-enhancing acquisitions. The positive market reaction can be rationalized by post-merger performance. Following acquisitions, banks with higher PPS experience greater improvements in their operating performance. We show that the effect of PPS is mainly evident in small and medium-sized banks, but is not present in large banks. (JEL G21, G34)