Journal of Financial Economics Vol. 114 No. 3 2014
CEO deal-making activities and compensation
Abstract
Using transactions generally overlooked in the compensation literature—joint ventures, strategic alliances, seasoned equity offerings (SEOs), and spin-offs—we find that, beyond compensation for increases in firm size or complexity, chief executive officers (CEOs) are rewarded for their deal-making activities. Boards pay CEOs for the core motivation of the deal, as well as for deal volume. We find that compensating for volume instead of core value creation occurs under weak board monitoring and that in deal-making firms, neither CEO turnover nor pay-for-performance responds to underperformance. We introduce an input monitoring explanation for these results: boards compensate for deal volume because of their inability to perfectly monitor outputs.
- DOI
- 10.1016/j.jfineco.2014.07.011
- Volume
- 114
- Issue
- 3
- Pages
- 471-492
- Language
- en
- Sources
- crossref bibtex:phds-export.bib openalex