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Executive compensation and firm risk after successful mergers and acquisitions in Africa

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  • Godfred Amewu
  • Paul Alagidede

Abstract

This paper examines the impact of various executive compensation types on the postmerger risk taking by firm's executives. We find that executive pay influences firm risk differently depending on compensation type and risk measure. Specifically, we find that rewarding executives with cash compensation reduces the total postmerger risk of acquirers. However, managers are motivated to increase systematic risk when they are rewarded with stock‐based incentives. Besides, based on the argument that managerial compensation portfolio might impact systematic and unsystematic risks differently, our findings show no evidence of the impact of executive pay on unsystematic risk.

Suggested Citation

  • Godfred Amewu & Paul Alagidede, 2019. "Executive compensation and firm risk after successful mergers and acquisitions in Africa," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 40(6), pages 672-703, September.
    • Handle: RePEc:wly:mgtdec:v:40:y:2019:i:6:p:672-703
    DOI: 10.1002/mde.3037
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    Cited by:

    1. Wafa Tariq Waqar, 2020. "Board size and acquisition outcome: The moderating role of home country formal institutional development," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 41(4), pages 529-541, June.
    2. Godfred Amewu & Imhotep Paul Alagidede, 2021. "Mergers, executive compensation and firm performance: The case of Africa," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(2), pages 407-436, March.
    3. Yuanyuan Luo & Da Ren, 2021. "Influence of the enterprise’s intelligent performance evaluation model using neural network and genetic algorithm on the performance compensation of the merger and acquisition parties in the commitmen," PLOS ONE, Public Library of Science, vol. 16(3), pages 1-16, March.

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