Gold for now and the golden years: Effects of CEO stock options and retirement pay on cross-border acquisitions. Issue 3 (20th August 2018)

• Record Type: Journal Article
• Authors: Lewellyn, Krista
• Is Part Of: Journal of strategy and management. Volume 11:Issue 3(2018)
• Page Start: 306
• Page End: 327
• Publication Date: 2018-08-20
• Subjects: Regulatory focus theory -- Cross-border acquisitions -- CEO stock options -- Managerial discretion -- CEO retirement pay -- Situational promotion focus; Management -- Periodicals; Strategic planning -- Periodicals; 658.401205
• DOI: 10.1108/JSMA-08-2017-0062
• Languages: English
• ISSNs: 1755-425X

Abstract

Abstract : Purpose: The purpose of this paper is to draw from regulatory focus theory, to examine the effects of the "gain/no gain" nature of stock options and retirement pay on the decision to engage in cross-border acquisitions. The moderating effects of managerial discretion arising from the external industry context and internal organizational leadership structure are also examined. Design/methodology/approach: The authors employ random effects negative binomial regression analysis with a longitudinal (2006–2016) data set of US public companies operating in four industries with differing levels of industry discretion: the oil and gas, paper and packaging, aerospace and defense, and telecommunications. Findings: The findings indicate that both CEO in-the-money stock options and retirement pay are positively related to cross-border acquisition activity. The results also demonstrate that managerial discretion, arising from the firm's external industry context, accentuates the positive relationship between both the value of CEO in-the-money stock options and retirement pay with cross-border acquisition activity. Practical implications: The findings provide implication for practice as understanding how retirement pay and stock options, both of which make up a substantial portion of overall CEO pay in the USA, motivate cross-border acquisition activity, may improve decisions by executives. The evidence also provides guidance to boards of directors who are charged with the responsibility of creating CEO compensation contracts. Originality/value: The paper fills important gaps in the existing research on the influence of compensation elements on firm outcomes, by offering a novel explanation for how in-the-money stock options and retirement pay affect CEOs' motivations to engage in cross-border acquisitions.