CEO compensation from M&As in Australia

This paper investigates the extent to which Australian CEOs are compensated following the completion of mergers and acquisitions (M&A)with reference to the incentive alignment and managerial power perspective. Findings reveal that CEOs of acquiring ?rms receive signi?- cantly higher compensation in the year of completing M&As and one year after. This higher compensation is presented in all forms: bonus only, salary only, salary and bonus, and total compensation. It is also found that the incentive alignment and managerial power approach are not mutually exclusive and they both can have some degrees of explaining the variation of CEO compensation following mergers. We ?nd a positive correlation between CEO compensation and ?rm performance, and some measures of CEOs e?ort and skill in completing the deal. However, we observe that CEOs of bidding ?rms have signi?cantly lower bonus and total compensation if there is any entrenchment in the CEO governance process (i.e. CEO is also a chair of the board, or a member of the nominating committee). This result is sharply opposite to the US evidence (Gristein and Hribar (2004)) where CEO compensation after mergers is signi?cantly driven by CEO power. Overall our ?ndings are more consistent with the predictions of the incentive alignment theory rather than the managerial power theo