CEO Compensation from M&As in Australia


  • Martin Bugeja,

  • Raymond da Silva Rosa,

  • Lien Duong,

  • H.Y Izan

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    • Martin Bugeja is Professor at the School of Accounting, University of Technology, Sydney, Australia. Lien Duong is Senior Lecturer at the School of Accounting, Curtin University, Australia. Raymond da Silva Rosa and H.Y Izan are Winthrop Professors at UWA Business School, the University of Western Australia. The authors would like to acknowlege the Australian Research Council for a grant to support this project, the help of an anonymous referee, Andrew Stark (editor), Tom Lechner, Nava Subramaniam and the excellent research assistance provided by Stefan Zorn, Jiawei Si and Eugene Lee during the course of this study. Earlier versions of the paper have benefited from comments received from delegates at the 2010 Annual Meeting of the Accounting and Finance Association of Australia and New Zealand (AFAANZ), the 2010 Annual Meeting of the American Accounting Association. The usual disclaimer applies.

Lien Duong, School of Accounting, Curtin University, Bentley Campus, GPO Box U1987, Perth, Western Australia 6845. e-mail:


Abstract:  We investigate Australian CEO compensation following mergers and acquisitions (M&As). We find CEOs of acquiring firms receive higher compensation in the year of M&A completion and one year after. We also find a positive correlation between CEO compensation and firm performance, and some measures of CEO effort and skill in completing the deal. However, CEOs of bidding firms receive a lower bonus and other compensation if they wield more managerial power (that is, if the CEO sits on the nominating committee, has a higher level of share ownership, or the board has more executive directors). This result is in sharp contrast to the US where compensation is influenced by CEO power. Overall our findings are more consistent with the predictions of the incentive alignment theory rather than the managerial power theory.