Governance structures and the compensation of powerful corporate leaders in financial firms during M&As

We examine the impact of mergers and acquisitions (M&As) on the compensation of powerful corporate leaders [i.e., boards of directors, including Chief Executives Officers (CEOs), Chief Financial Officers (CFOs), and Board Chairs] of acquiring firms. Using one of the largest datasets on M&As, directors' compensation, and governance to -date, consisting of a sample of UK financials (banks, insurance firms, private equity firms, and speciality finance firms) over a 13 -year period, our results obtained by employing multivariate regression analyses show that acquisitions, on average, have a positive and significant impact on directors' compensation. This effect applies to both powerful corporate executives (CEOs, CFOs, and all other executive directors) and other non-executive directors. However, the positive acquisition effect on top executive compensation is much higher in larger and more complex acquisitions. We also find that much of the acquisition-related pay raises is equity-based rather than cash-based. Finally, we find CEOs to be the top beneficiaries from acquisitions. We interpret our findings within a multi -theoretical framework that draws insights from agency, executive power, managerial talent, and tournament theories of top executive compensation. (C) 2019 Elsevier Inc. All rights reserved.