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Decision Making in Acquisitions: The Effect of Outside Directors’ Compensation on Acquisition PatternsSchulich School of Business, York University, 4700 Keele Street, Toronto, ON M3J1P3, Canada, ydeutsch{at}schulich.yorku.ca
Institute of Strategy and International Business, Helsinki University of Technology, P.O. Box 5500 FI 02015 TKK, Finland
Institute of Strategy and International Business, Helsinki University of Technology, P.O. Box 5500 FI 02015 TKK, Finland This article examines how the compensation paid for outside directors affects firms’ acquisition behavior. Using panel data of Standard & Poor’s 1500 firms between 1996 and 2002, the authors find that stock and stock option pay for outside directors are related in an inverted U-shaped manner to a firm’s acquisition rate and that for stock options, this relationship is moderated by board composition. Their findings suggest a dual agency model of corporate governance, according to which not only executives’ incentives but also outside directors’ incentives should be aligned with the shareholder value creation.
Key Words: acquisition behavior • outside directors • stock-based compensation
Journal of Management, Vol. 33, No. 1,
30-56 (2007) This article has been cited by other articles:
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