Gold for now and the golden years: Effects of CEO stock options and retirement pay on cross-border acquisitions

Date

2018-07-09

Authors

Journal Title

Journal ISSN

Volume Title

Publisher

Emerald Insight

Abstract

Abstract Purpose The purpose of this paper is to draw from regulatory focus theory, to examine the effects of the “gain/no gain” nature of stock options and retirement pay on the decision to engage in cross-border acquisitions. The moderating effects of managerial discretion arising from the external industry context and internal organizational leadership structure are also examined. Design/methodology/approach The authors employ random effects negative binomial regression analysis with a longitudinal (2006–2016) data set of US public companies operating in four industries with differing levels of industry discretion: the oil and gas, paper and packaging, aerospace and defense, and telecommunications. Findings The findings indicate that both CEO in-the-money stock options and retirement pay are positively related to cross-border acquisition activity. The results also demonstrate that managerial discretion, arising from the firm’s external industry context, accentuates the positive relationship between both the value of CEO in-the-money stock options and retirement pay with cross-border acquisition activity. Practical implications The findings provide implication for practice as understanding how retirement pay and stock options, both of which make up a substantial portion of overall CEO pay in the USA, motivate cross-border acquisition activity, may improve decisions by executives. The evidence also provides guidance to boards of directors who are charged with the responsibility of creating CEO compensation contracts. Originality/value The paper fills important gaps in the existing research on the influence of compensation elements on firm outcomes, by offering a novel explanation for how in-the-money stock options and retirement pay affect CEOs’ motivations to engage in cross-border acquisitions.

Description

Keywords

Stocks, Chief executive officers

Citation

Lewellyn, K. (2018), "Gold for now and the golden years: Effects of CEO stock options and retirement pay on cross-border acquisitions", Journal of Strategy and Management, Vol. 11 No. 3, pp. 306-327. https://doi.org/10.1108/JSMA-08-2017-0062

URI

http://hdl.handle.net/11416/883

DOI

Collections

School of Business and Free Enterprise