Decision making in acquisitions : the effect of outside director's compensation on acquisition patterns
By: DEUTSCH, Yuval
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Contributor(s): KEIL, Thomas | LAAMANEN, Tomi.
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ArticlePublisher: London, UK : Sage Publications, February 2007Journal of Management : J.O.M 33, 1, p. 30-56Abstract: This article examines how the compensation paid for outside directors affects firms acquisition behavior. Using panel data of Standard & Poors 1500 firms between 1996 and 2002, the authors find that stock and stock option pay for outside directors are related in an inverted U-shaped manner to a firms acquisition rate and that for stock options, this relationship is moderated by board composition. Their findings suggest a dual agency model of corporate governance, according to which not only executives incentives but also outside directors incentives should be aligned with the shareholder value creation
This article examines how the compensation paid for outside directors affects firms acquisition behavior. Using panel data of Standard & Poors 1500 firms between 1996 and 2002, the authors find that stock and stock option pay for outside directors are related in an inverted U-shaped manner to a firms acquisition rate and that for stock options, this relationship is moderated by board composition. Their findings suggest a dual agency model of corporate governance, according to which not only executives incentives but also outside directors incentives should be aligned with the shareholder value creation
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