The authors thank Mehmet Akbulut, Hsin-Hui Chiu, Bill Christie (Editor), Josh Finkenberg, Yi Jiang, Micah Officer, and two anonymous referees, as well as seminar participants at Loyola Marymount University, the 2011 California Corporate Finance Conference, and the 2011 Western Economics Association conference for their helpful comments and suggestions. We also thank Katie Belsky, Steve Snyder, and Kelsey Stricker for their research assistance.
Accelerated Vesting in Takeovers: The Impact on Shareholder Wealth
Article first published online: 31 OCT 2012
© 2012 Financial Management Association International.
Volume 42, Issue 1, pages 101–126, Spring 2013
How to Cite
Elkinawy, S. and Offenberg, D. (2013), Accelerated Vesting in Takeovers: The Impact on Shareholder Wealth. Financial Management, 42: 101–126. doi: 10.1111/j.1755-053X.2012.01202.x
- Issue published online: 5 MAR 2013
- Article first published online: 31 OCT 2012
We study the impact of accelerated vesting of equity awards on takeovers, whereby the restricted stock and/or stock options of the target chief executive officer (CEO) immediately vest and become unrestricted upon the close of the acquisition. We find that takeover premiums are significantly larger when the target CEO receives the benefit of accelerated vesting as compared to target firms with CEO's that continue to vest in their awards after closing the deal. Our evidence suggests that these cash windfalls triggered by accelerated vesting are beneficial to shareholders in completed deals. Accelerated vesting appears to be an efficient form of ex ante managerial contracting.