CEO Compensation and Incentives - Evidence From M&amp;A Bonuses

Grinstein, Yaniv; Hribar, Paul

doi:10.2139/ssrn.417763

Cited by 230 publications

(390 citation statements)

References 12 publications

Supporting

Mentioning

328

Contrasting

Unclassified

Order By: Relevance

“…This paper's documentation of large payouts to CEOs when they leave their posts indicates that turnover, whether planned or forced, serves as a type of "compensation event" in which top managers often obtain extraordinary rewards on top of their regular annual pay. The findings complement other recent research into one-time rewards for CEOs who agree to sell their firms (Hartzell, Ofek and Yermack, 2004) and CEOs who make acquisitions (Grinstein and Hribar, 2004). Together these studies suggest that a full understanding of top management incentives requires looking beyond the effects of routine annual compensation.…”

supporting

confidence: 77%

Golden Handshakes: Rewards for CEOs Who Leave

Yermack

2004

SSRN Journal

View full text Add to dashboard Cite

This paper studies separation payments made when CEOs leave their firms. In my sample of Fortune 500 companies these packages are widespread and lucrative. Almost 80 percent of CEOs receive separation pay, and its mean present value exceeds $4.5 million. Severance is positively associated with future pay that CEOs might expect until age 65, and is higher when CEOs depart involuntarily. Shareholders react negatively when separation agreements are disclosed, but only in cases of voluntary CEO turnover. Some evidence suggests that severance pay acts as a bonding device between the board and CEO, while other evidence accords with theories of rent extraction.I appreciate helpful comments from John Core and Kose John.

show abstract

supporting

confidence: 77%

Golden Handshakes: Rewards for CEOs Who Leave

Yermack

2004

SSRN Journal

View full text Add to dashboard Cite

show abstract

“…One conceivable explanation is that captured, or partially captured boards, tend to insulate CEOs from the downside consequences of their mistakes. In fact, there is a body of evidence indicating that unwarranted generosity after mergers is exacerbated by weak corporate governance (Harford andLi 2007, Grinstein andHribar 2004). Grinstein and Hribar (2004) find that weaker boards tend to grant larger bonuses for mergers.…”

Section: Ceo Compensation and Mergers And Divestituresmentioning

confidence: 99%

“…In fact, there is a body of evidence indicating that unwarranted generosity after mergers is exacerbated by weak corporate governance (Harford andLi 2007, Grinstein andHribar 2004). Grinstein and Hribar (2004) find that weaker boards tend to grant larger bonuses for mergers. Harford and Li (2007) show that CEOs are punished for poor post-merger performance when the board is strong.…”

Section: Ceo Compensation and Mergers And Divestituresmentioning

confidence: 99%

Determinants of CEO Compensation before and after the Financial Crisis

Sonenshine¹,

Larson²,

Cauvel³

2016

View full text Add to dashboard Cite

This paper revisits the determinants of CEO compensation using recent data (covering 125 firms from 2003 to 2012). We focus in particular on how CEO pay changed after the 2008 financial crisis. Post-crisis, the composition of pay shifted away from cash toward equity. Furthermore, post-crisis pay is tied more closely to performance and less closely to factors (like firm size) that are more tenuously connected to shareholder value. We also investigate the impact of mergers and divestitures on CEO pay, overall and before and after the crisis. Finally, we consider the role that board composition plays in CEO compensation and find that CEOs take larger post-crisis pay cuts when they have more employees on their boards.

show abstract

“…CEO pay tends to increase after bank mergers, even if the acquirer's stock price declines (Bliss and Rosen, 2001). Across all industries, acquirer CEOs receive cash bonuses for deal completion, and these bonuses are unrelated to the acquirer's deal announcement return, but positively related to deal size and measures of CEO power (Grinstein and Hribar, 2004). For example, in 2000, Chase Manhattan CEO William Harrison was paid a $20 million bonus for negotiating the acquisition of J.P. Morgan, even though the negotiations only took three weeks, and Chase's stock price subsequently dropped by one third.…”

mentioning

confidence: 99%

Executive Compensation: A Survey of Theory and Evidence

Edmans¹,

Gabaix²,

Jenter³

2017

SSRN Journal

View full text Add to dashboard Cite

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper reviews the theoretical and empirical literature on executive compensation. We start by presenting data on the level of CEO and other top executive pay over time and across firms, the changing composition of pay; and the strength of executive incentives. We compare pay in U.S. public firms to private and non-U.S. firms. We then critically analyze three non-exclusive explanations for what drives executive pay -shareholder value maximization by boards, rent extraction by executives, and institutional factors such as regulation, taxation, and accounting policy. We confront each hypothesis with the evidence. While shareholder value maximization is consistent with many practices that initially seem inefficient, no single explanation can account for all facts and historical trends; we highlight major gaps for future research. We discuss evidence on the effects of executive pay, highlighting recent identification strategies, and suggest policy implications grounded in theoretical and empirical research. Our survey has two main goals. First, we aim to tightly link the theoretical literature to the empirical evidence, and combine the insights contributed by all three views on the drivers of pay. Second, we aim to provide a user-friendly guide to executive compensation, presenting shareholder value theories using a simple unifying model, and discussing the challenges and methodological issues with empirical research. JEL-Codes: D310, D860, G340, M120. Terms of use: Documents in

show abstract

CEO Compensation and Incentives - Evidence From M&A Bonuses

Cited by 230 publications

References 12 publications

Golden Handshakes: Rewards for CEOs Who Leave

Golden Handshakes: Rewards for CEOs Who Leave

Determinants of CEO Compensation before and after the Financial Crisis

Executive Compensation: A Survey of Theory and Evidence

Contact Info

Product

Resources

About