Renegotiations of Target CEOs' Personal Benefits During Mergers and Acquisitions

• 成果类型: Article
• 署名作者: Patrick, Paige H.
• 署名单位: University of Washington; University of Washington Seattle
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12384
• 发表日期: 2018
• 页码: 1999-2029
• 关键词: GOLDEN PARACHUTES; STOCK; performance; improve; pay

摘要

Many view large payments following mergers or acquisitions as excessive and evidence of rent extraction. Using additional disclosures required by the SEC since 2006, I hand-collect details of preexisting change in control (CIC) provisions in employment agreements and CIC benefits granted to target CEOs during mergers. I find that CIC benefits are renegotiated in approximately 50 percent of my sample. I then investigate whether renegotiation of CIC benefits tends to be opportunistic, or, instead, evidence of efficient contracting. The overall evidence is more consistent with efficient contracting. This contrasts prior research that focuses solely on certain components of CIC benefits, such as employment in merged firms or merger bonuses. I find that changes in CIC benefits are positively associated with the CEO's horizon, as would be predicted by efficient contracting, but only limited evidence that changes in CIC benefits are positively associated with proxies for CEO power, as would be predicted by rent extraction. Acquiring firm shareholders interpret increases in target CEOs' CIC benefits as evidence of rent extraction, although I find that the merged firm's post-merger performance is positively associated with changes in CIC benefits. This result is more consistent with acquiring firms providing target CEOs increased CIC benefits to complete mergers and realize synergies than with value-reducing rent extraction.