Merger & Acquisition Effect on Management Pay

Abstract

CEO compensation has gathered a lot of attention in recent years, following extreme growth and news of record-breaking salaries. At the same time, Merger & Acquisition (hereafter M&A) activity has accelerated in amount and deal size. Several researchers have tried to quantify and discuss the link between management compensation and M&A, including discussion areas such as established theories of agency problem as well as managerial power and a lot of research done globally to understand the relationship between M&A deal and compensation. However, there is only some limited research looking at the effect of M&A on management compensation in Swedish market. Based on this fact, the purpose of this thesis is to investigate M&A effects on management compensation by analysing listed companies in Nasdaq Stockholm Stock Exchange. A regression and chow test are performed to examine the M&A deal influence on compensation. The empirical findings support the proposition that M&A positively influences compensation. Further, the findings validate previous research that company size, by proxy of firm total assets, has a significant influence on management compensation.