acase@tulane.edu / Despite the recent advocates for lengthening executive compensation duration to curb short-termism and promote long-term value creation, there is no study investigating whether long pay duration induces better investment decisions in the long run. Using a comprehensive measure of compensation duration, we find that CEOs with long pay duration are more likely to engage in large acquisitions. These acquisitions receive a significantly worse market reaction, and experience lower post-acquisition abnormal operating and stock performance compared with deals conducted by CEOs with short pay duration. Further analysis suggests that negative association between compensation duration and acquisition performance is driven by the use of time-vesting compensation plan. Duration of performance-vesting plans has no significant effect on M&A performance. Lastly, we find that CEOs are likely to engage in more risk-decreasing M&As, as long pay duration plans impose a higher firm risk to executives. The results highlight the complex nature of compensation duration and suggest that focusing on one dimension of compensation design is insufficient to create long-term shareholder value. / 1 / Qi-Yuan Peng
| Identifer | oai:union.ndltd.org:TULANE/oai:http://digitallibrary.tulane.edu/:tulane_77026 |
| Date | January 2017 |
| Contributors | Peng, Qi-Yuan (author), Tice, Sheri (Thesis advisor), A.B. Freeman School of Business Finance (Degree granting institution) |
| Publisher | Tulane University |
| Source Sets | Tulane University |
| Language | English |
| Detected Language | English |
| Type | Text |
| Format | electronic, 86 |
| Rights | No embargo, Copyright is in accordance with U.S. Copyright law. |
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