Incentive compensation vs. SOX: evidence from corporate acquisition decisions

We empirically examine the impact of incentive compensation on the riskiness of acquisition decisions before and after the passage of Sarbanes-Oxley Act (SOX). Controlling for confounding events, firm characteristics and industry fixed effects, we find a substantial change in the relation between equity-related compensation and acquisition risk post-SOX stemming from a previously unidentified shift in the effectiveness of executive stock options to control managerial risk aversion. Not only has incentive compensation failed to offset the adverse impact of SOX on risk-taking activity but it has also significantly altered managerial incentives. The decrease in acquisition risk post-SOX cannot be solely attributed to changes in the structure of executive compensation but it additionally stems from the way managers perceive compensation-based incentives in the new regulatory environment. The results are robust to different measures of acquisition risk and alternative definitions of incentive compensation

Managerial compensation incentives and merger waves

This paper examines the relation between executive compensation incentives and the nature of merger transactions inside and outside of merger waves. We find that the sensitivity of CEO wealth to firm risk, vega, increases the likelihood of merger transactions outside of waves, but is unrelated to merger frequency inside wave periods. CEOs whose compensation is more closely tied to firm risk make better performing acquisitions when they acquire outside of merger waves, but this is not the case for in-wave deals, suggesting that underperformance of acquiring firms during waves can be attributed in part to ineffective compensation incentives. We also find that the cross-sectional dispersion of acquirers’ returns is higher for in-wave acquisitions relative to acquisitions made outside a wave, suggesting that out-wave acquisitions are characterized by lower uncertainty of future stock price returns. This is again restricted to high vega CEOs during out-wave periods

Incentive compensation vs SOX: evidence from corporate acquisition decisions

In this paper, we use the introduction of the Sarbanes-Oxley Act in 2002 to assess the impact of executive option and stock grants on corporate acquisition decisions. Amongst its many innovations, the Sarbanes-Oxley Act (SOX) has limited the value and effect of equity-related compensation. We find strong evidence of a shift in the factors driving acquisitions post-SOX. Specifically, while bid premiums have fell irrespectively of the type of acquirer, highly incentivised managers have become more risk-averse after the passage of the Act. Investors also appear to have recognised the effect of a change in equity-related pay. Both market response to acquisition announcements and post-acquisition performance have been improved after the introduction of SOX but these cannot be attributed to firms that grant high levels of incentive compensation to their managers. Our results are robust to a number of explanatory factors and confounding events in the post-SOX period

Longitudinal thalamic white and gray matter changes associated with visual hallucinations in Parkinson’s disease

Objective: Visual hallucinations are common in Parkinson’s disease (PD) and associated with worse outcomes. Large-scale network imbalance is seen in PD-associated hallucinations, but mechanisms remain unclear. As the thalamus is critical in controlling cortical networks, structural thalamic changes could underlie network dysfunction in PD hallucinations. Methods: We used whole-brain fixel-based analysis and cortical thickness measures to examine longitudinal white and grey matter changes in 76 patients with PD (15 hallucinators, 61 non-hallucinators) and 26 controls at baseline, and after 18 months. We compared white matter and cortical thickness, adjusting for age, gender, time-between-scans and intracranial volume. To assess thalamic changes, we extracted volumes for 50 thalamic subnuclei (25 each hemisphere) and mean fibre crosssection (FC) for white matter tracts originating in each subnucleus and examined longitudinal change in PDhallucinators versus non-hallucinators. Results: PD hallucinators showed white matter changes within the corpus callosum at baseline and extensive posterior tract involvement over time. Less extensive cortical thickness changes were only seen after followup. White matter connections from the right medial mediodorsal magnocellular thalamic nucleus showed reduced FC in PD hallucinators at baseline followed by volume reductions longitudinally. After follow-up, almost all thalamic subnuclei showed tract losses in PD hallucinators compared with non-hallucinators. Interpretation: PD hallucinators show white matter loss particularly in posterior connections and in thalamic nuclei, over time with relatively preserved cortical thickness. The right medial mediodorsal thalamic nucleus shows both connectivity and volume loss in PD hallucinations. Our findings provide mechanistic insights into the drivers of network imbalance in PD hallucinations and potential therapeutic targets

Fibre-specific white matter reductions in Parkinson’s hallucinations and visual dysfunction

Objective: To investigate the microstructural and macrostructural white matter changes that accompany visual hallucinations and low visual performance in Parkinson’s disease, a risk factor for Parkinson’s dementia. Methods: We performed fixel-based analysis, a novel technique that provides metrics of specific fibre-bundle populations within a voxel (or fixel). Diffusion MRI data was acquired from patients with Parkinson’s disease (n=105, of which 34 low visual performers and 19 hallucinators) and age-matched controls (n=35). We used whole brain fixel-based analysis to compare micro-structural differences in fibre density (FD), macro-structural differences in fibre bundle cross-section (FC) and the combined fibre density and cross-section metric (FDC) across all white matter fixels. We then performed a tract of interest analysis comparing the most sensitive FDC metric across 11 tracts within the visual system. Results: Patients with Parkinson’s disease hallucinations exhibited macrostructural changes (reduced FC) within the splenium of the corpus callosum and the left posterior thalamic radiation compared to patients without hallucinations. Whilst there were no significant changes in FD, we found large reductions in the combined FDC metric in Parkinson’s hallucinators within the splenium (>50% reduction compared to non-hallucinators). Patients with Parkinson’s disease and low visual performance showed widespread microstructural and macrostructural changes within the genu and splenium of the corpus callosum, bilateral posterior thalamic radiations and the left inferior fronto-occipital fasciculus. Conclusions: We demonstrate specific white matter tract degeneration affecting posterior thalamic tracts in patients with Parkinson’s disease with hallucinations and low visual performance, providing direct mechanistic support for attentional models of visual hallucinations

Visual dysfunction predicts cognitive impairment and white matter degeneration in Parkinson's disease

Visual dysfunction predicts dementia in Parkinsons disease (PD), but whether this translates to structural change is not known. We aimed to identify longitudinal white matter changes in patients with Parkinsons disease and low visual function and also in those who developed mild cognitive impairment (MCI). We used fixel-based analysis to examine longitudinal white matter change in PD. Diffusion MRI and clinical assessments were performed in 77 patients at baseline (22 low visual function /55 intact vision; and 13 MCI, 13 MCI converters /51 normal cognition) and 25 controls and again after 18 months. We compared micro-structural changes in fibre density, macro-structural changes in fibre bundle cross-section (FC) and combined fibre density and cross-section across white matter, adjusting for age, gender and intracranial volume. Patients with Parkinsons and visual dysfunction showed worse cognitive performance at follow up and were more likely to develop MCI compared with those with normal vision (p=0.008). Parkinsons with poor visual function showed diffuse micro-structural and macro-structural changes at baseline, whereas those with MCI showed fewer baseline changes. At follow-up, Parkinsons with low visual function showed widespread macrostructural changes, involving the fronto-occipital fasciculi, external capsules, and middle cerebellar peduncles bilaterally. No longitudinal change was seen in baseline MCI or in MCI converters, even when the two groups were combined. Parkinsons patients with poor visual function show increased white matter damage over time, providing further evidence for visual function as a marker of imminent cognitive decline

Value creation around merger waves: the role of managerial compensation

This paper examines the relation between executive compensation and value creation in merger waves. The sensitivity of CEO wealth to firm risk increases the likelihood of out‐of‐wave merger transactions but has no influence on in‐wave merger frequency. CEOs with compensation linked to firm risk have better out‐of‐wave merger performance in comparison to in‐wave mergers. We also present evidence that cross‐sectional acquirer return dispersion is greater for in‐wave acquisitions. Our results suggest that the underperformance of acquiring firms during merger waves can be attributed in part to ineffective compensation incentives, and appropriate managerial incentives can create value, particularly in non‐wave periods

One size fits all? The effectiveness of incentive compensation in public acquisitions

This paper provides new evidence on the relation between incentive compensation and acquisition performance. We find that higher sensitivity of executives’ wealth to stock-price changes, Delta, is positively associated with post-acquisition stock-price performance and that higher sensitivity of executives’ wealth to stock-return volatility, Vega, leads to risk-increasing acquisitions only when the target is a non-publicly listed firm. In public deals, we find no difference in the deal synergies available to acquiring firm’s shareholders between high and low incentivised managers and no relation between incentive compensation and the quality of M&A decisions in terms of risk and stock-price returns. Our results are robust to a number of deal and firm characteristics and to controls for selection bias and endogeneity. Our findings suggest that when a publicly listed firm is acquired, the increased negotiation power of the target and information asymmetry considerations offset the positive impact of incentive compensation on both stock-price performance and risk-taking

Organisational and neuromodulatory underpinnings of structural-functional connectivity decoupling in patients with Parkinson's disease

Parkinson's dementia is characterised by changes in perception and thought, and preceded by visual dysfunction, making this a useful surrogate for dementia risk. Structural and functional connectivity changes are seen in humans with Parkinson's disease, but the organisational principles are not known. We used resting-state fMRI and diffusion-weighted imaging to examine changes in structural-functional connectivity coupling in patients with Parkinson's disease, and those at risk of dementia. We identified two organisational gradients to structural-functional connectivity decoupling: anterior-to-posterior and unimodal-to-transmodal, with stronger structural-functional connectivity coupling in anterior, unimodal areas and weakened towards posterior, transmodal regions. Next, we related spatial patterns of decoupling to expression of neurotransmitter receptors. We found that dopaminergic and serotonergic transmission relates to decoupling in Parkinson's overall, but instead, serotonergic, cholinergic and noradrenergic transmission relates to decoupling in patients with visual dysfunction. Our findings provide a framework to explain the specific disorders of consciousness in Parkinson's dementia, and the neurotransmitter systems that underlie these