The Impact of Mergers and Acquisitions on Executive Pay in the United Kingdom

Abstract

This paper examines the impact of acquisitions by UK acquirers on executive pay. The overall sample shows a significant transitory pay increase. Pay changes are not affected by target nationality or organizational form, although initial cross-border acquisitions result in higher pay. Pay increases are higher following acquisitions of targets with high pay, but not high-pay countries. CEOs are rewarded equally for bad and good acquisitions, and those well rewarded are more likely to re-acquire. However, bad acquisitions do not increase CEO wealth because CEO shareholding value declines. Pay impacts are not affected by the acquiring firms’ strength of corporate governance