Research into executive compensation, risk, and mergers and acquisitions

Wang, Bo (2020). Research into executive compensation, risk, and mergers and acquisitions. University of Birmingham. Ph.D.

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Abstract

This thesis contains three empirical papers in corporate finance. By examining post-merger leverage deviation adjustment, the first paper in Chapter 2 discovers that target firm pre-merger leverage deviation plays a more important role than previously documented. The post-merger leverage deviation adjustment is a joint effect by both bidder and target pre-merger leverage deviation. Significant post-merger leverage deviation adjustment patterns only exist when the bidder and the target firm have the same direction of leverage deviation before the merger. The second paper in the thesis reveals that CEO age is a crucial factor in determining the effectiveness of option convexity. Compensation vega more effectively induces older CEOs to embrace a higher level of risk and undertake risky policies. Option convexity encourages older CEOs to shift more investment from relatively safer CAPEX to R&D, raise financial leverage, and increase firm focus. Further, by utilising FAS 123R as an exogenous shock to CEO option rewards, the third paper in this thesis confirms that option vega is positively associated with M&A activities. More importantly, the thesis directly tests the relationship between option vega and managerial risk-taking in acquisitions and shows a positive association.

Type of Work:

Thesis (Doctorates > Ph.D.)

Award Type:

Doctorates > Ph.D.

Supervisor(s):