Does Executive Compensation affect Firms' Acquisition Decisions? Evidence from China

Jiang, Lin; Kling, Gerhard; Bo, Hong

Abstract

Exploiting regulatory changes in China that govern the use of stock options, we investigate whether executive compensation affects acquisition decisions and post-acquisition performance from 2005 to 2014. We find that acquisitions are not driven by stock options. Managerial stock ownership promotes acquisitions at low levels of ownership – but leads to less frequent acquisitions at higher levels, implying a non-linear relationship. Similarly, we also find a non-linear impact of managerial stock ownership on long-term post-acquisition performance. However, neither stock options nor stock ownership determine short-term post-acquisition performance. Finally, state ownership has a significant impact on the compensation-acquisition relationship in that the above relationships only exist in private enterprises.

Citation

Jiang, L., Kling, G., & Bo, H. (2021). Does Executive Compensation affect Firms' Acquisition Decisions? Evidence from China. Asia Pacific Business Review, 27(5), 731-748. https://doi.org/10.1080/13602381.2020.1834736

• Journal Article Type: Article
• Acceptance Date: Oct 7, 2020
• Online Publication Date: Oct 28, 2020
• Publication Date: Oct 1, 2021
• Deposit Date: Jan 12, 2021
• Publicly Available Date: Jan 13, 2021
• Journal: Asia Pacific Business Review
• Print ISSN: 1360-2381
• Electronic ISSN: 1743-792X
• Publisher: Taylor and Francis Group
• Peer Reviewed: Peer Reviewed
• Volume: 27
• Issue: 5
• Pages: 731-748
• DOI: https://doi.org/10.1080/13602381.2020.1834736
• Keywords: Executive compensation, Merge & Acquisition