Does executive compensation affect firms’ acquisition decisions? Evidence from China

Lin Jiang, Gerhard Kling* (Corresponding Author), Hong Bo

*Corresponding author for this work

Research output: Contribution to journalArticle

Abstract

Exploiting regulatory changes in China that govern the use of stock options, we
investigate whether executive compensation affects acquisition decisions and post-acquisition performance from 2005 to 2014. We find that acquisitions are not driven by stock options. Managerial stock ownership promotes acquisitions at low levels of ownership – but leads to less frequent acquisitions at higher levels, implying a non-linear relationship. Similarly, we also find a non-linear impact of managerial stock ownership on long-term post-acquisition performance. However, neither stock options nor stock ownership determine short-term post-acquisition performance. Finally, state ownership has a significant impact on the compensation-acquisition relationship in that the above relationships only exist in private
enterprises.
Original languageEnglish
JournalAsia Pacific Business Review
Publication statusAccepted/In press - 7 Oct 2020

Keywords

  • Acquisition
  • state-owned enterprises
  • stock option
  • stock ownership

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