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| Author: | Heitzman, S. |
| Title: | Equity grants to target CEOs during deal negotiations |
| Journal: | Journal of Financial Economics
2011 : NOV, VOL. 102:2, p. 251-271 |
| Index terms: | stocks chief executive officers board of directors negotiation consolidation incentives compensation bargaining mergers |
| Language: | eng |
| Abstract: | I examine the determinants and results of granting equity to the target's Chief Executive Officer (CEO) when negotiating deals. These negotiation grants likely provide information about the acquisition, benefit from the deal premium, and offer more timely bargaining incentives. CEOs are found more likely to receive equity during negotiations when they negotiate for the target, especially when the target has more bargaining power. This indicates that boards use equity to strengthen bargaining incentives for CEOs with the most power over deal price. I find limited evidence of usage of negotiation grants as compensation and no evidence of them having a material adverse effect on shareholders. |
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