Incentive pay and acquirer returns – The impact of Sarbanes–Oxley

Marcin W. Krolikowski

The Quarterly Review of Economics and Finance, 2016, vol. 59, issue C, 99-111

Abstract: This study examines how pay-for-performance influences the quality of merger decisions before and after Sarbanes–Oxley (SOX). Pay-for performance has a significant positive effect on acquirer returns of 0.9% pre-SOX and 1.1% post-SOX around the three-day event window. Bidders with high pay-for-performance pay a 23.3% lower merger premium in listed target acquisitions. The positive effect of pay-for-performance is more important for public target acquisitions overall, for small acquirers pre-SOX, and for large acquirers post-SOX. In the long run, bidders with high pre-merger pay-for-performance do not necessarily outperform.

Keywords: Mergers; Acquisitions; Managerial incentives; Executive compensation; Sarbanes–Oxley Act (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:59:y:2016:i:c:p:99-111

DOI: 10.1016/j.qref.2015.06.007

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