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Pikulina, Elena; Renneboog, Luc --- "Serial takeovers, large shareholders, and CEOs’ equity-based compensation" [2015] ELECD 833; in Hill, G. Jennifer; Thomas, S. Randall (eds), "Research Handbook on Shareholder Power" (Edward Elgar Publishing, 2015) 297

Book Title: Research Handbook on Shareholder Power

Editor(s): Hill, G. Jennifer; Thomas, S. Randall

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781782546849

Section: Chapter 14

Section Title: Serial takeovers, large shareholders, and CEOs’ equity-based compensation

Author(s): Pikulina, Elena; Renneboog, Luc

Number of pages: 22

Abstract/Description:

In this chapter we investigate how the structure of a CEO’s compensation package – and especially his bonus and equity-based compensation (EBC) – influences his M & A decisions. We find that a CEO with a higher proportion of EBC is more likely to initiate (serial) acquisitions. Likewise, a CEO who receives a larger bonus is more eager to be involved in takeovers. We argue that equity-based compensation along with strong performance requirements (stock options and restricted stock become vested only if specific performance criteria are met) induce managers to adopt aggressive growth strategies through M & As. Large outside shareholders reduce a firm’s takeover activity, which is also the case when a CEO holds a significant equity stake.