Does executive compensation affect firms' acquisition decisions? Evidence from China. Issue 5 (20th October 2021)

• Record Type: Journal Article
• Authors: Jiang, Lin; Kling, Gerhard; Bo, Hong
• Is Part Of: Asia Pacific business review. Volume 27:Issue 5(2021)
• Page Start: 731
• Page End: 748
• Publication Date: 2021-10-20
• Subjects: Acquisition -- state-owned enterprises -- stock option -- stock ownership; Asia -- Commerce -- Periodicals; 338.095
• DOI: 10.1080/13602381.2020.1834736
• Languages: English
• ISSNs: 1360-2381

Abstract

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.