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Publication - Professor Neslihan Ozkan

    Do CEOs Gain More in Foreign Acquisitions than Domestic Acquisitions?


    Ozkan, N, 2012, ‘Do CEOs Gain More in Foreign Acquisitions than Domestic Acquisitions?’. Journal of Banking and Finance, vol 36., pp. 1122-1138


    We examine the impact of domestic and foreign acquisitions on CEO compensation packages using a sample of 147 completed bids by UK companies from 1999 to 2005. As our measure of CEO compensation, we use total CEO compensation which includes both cash and equity-based components of compensation. Our findings show that foreign acquisitions lead to higher CEO compensation than domestic acquisitions. We do not find any statistically significant link between CEO compensation and firm performance during post acquisition period.

    Overall, our findings suggest that CEOs have strong incentives to do foreign acquisitions rather than domestic acquisitions since they receive larger compensation following a foreign acquisition regardless of how poor firm performance is. In our regression model, we control for the potential impact of various corporate governance characteristics, that is, directors’ ownership, CEO ownership, board size, board busyness, proportion of independent directors, and CEO tenure, in determining CEO pay packages following an acquisition. We also investigate the role of institutional shareholders, examining whether ownership by foreign and domestic financial institutions influences CEO pay during the post acquisition period. Our findings show that domestic institutional block holders do not play a significant role in determining the level of CEO pay during the year following an acquisition, while foreign institutional block holders has a significant and negative influence. Finally, we find that directors’ ownership has a significant and negative impact while CEO ownership, CEO tenure, board size, board busyness and proportion of independent directors do not have significant impact on CEO pay during post acquisition period.

    Full details in the University publications repository