The Impact of Mergers and Acquisitions on Executive Pay in the United Kingdom

This paper examines the impact of acquisitions by UK acquirers on executive pay. The overall sample shows a significant transitory pay increase. Pay changes are not affected by target nationality or organizational form, although initial cross-border acquisitions result in higher pay. Pay increases are higher following acquisitions of targets with high pay, but not high-pay countries. CEOs are rewarded equally for bad and good acquisitions, and those well rewarded are more likely to re-acquire. However, bad acquisitions do not increase CEO wealth because CEO shareholding value declines. Pay impacts are not affected by the acquiring firms’ strength of corporate governance.