Table of Contents

Research Handbook on Shareholder Power

Research Handbook on Shareholder Power

Research Handbooks in Corporate Law and Governance series

Edited by Jennifer G. Hill and Randall S. Thomas

Much of the history of corporate law has concerned itself not with shareholder power, but rather with its absence. Yet, as this Handbook shows, there have been major shifts in capital market structure that require a reassessment of the role and power of shareholders. This book provides a contemporary analysis of shareholder power and considers the regulatory consequences of changing ownership patterns around the world. Leading international scholars in corporate law, governance and financial economics address these central issues from a range of different perspectives including historical, contemporary, legal, economic, political and comparative.

Chapter 14: Serial takeovers, large shareholders, and CEOs’ equity-based compensation

Elena Pikulina and Luc Renneboog

Subjects: law - academic, corporate law and governance


In this chapter we investigate how the structure of a CEO’s compensation package – and especially his bonus and equity-based compensation (EBC) – influences his M & A decisions. We find that a CEO with a higher proportion of EBC is more likely to initiate (serial) acquisitions. Likewise, a CEO who receives a larger bonus is more eager to be involved in takeovers. We argue that equity-based compensation along with strong performance requirements (stock options and restricted stock become vested only if specific performance criteria are met) induce managers to adopt aggressive growth strategies through M & As. Large outside shareholders reduce a firm’s takeover activity, which is also the case when a CEO holds a significant equity stake.

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