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Gold for now and the golden years

Gold for now and the golden years The purpose of this paper is to draw from regulatory focus theory, to examine the effects of the “gain/no gain” nature of stock options and retirement pay on the decision to engage in cross-border acquisitions. The moderating effects of managerial discretion arising from the external industry context and internal organizational leadership structure are also examined.Design/methodology/approachThe authors employ random effects negative binomial regression analysis with a longitudinal (2006–2016) data set of US public companies operating in four industries with differing levels of industry discretion: the oil and gas, paper and packaging, aerospace and defense, and telecommunications.FindingsThe findings indicate that both CEO in-the-money stock options and retirement pay are positively related to cross-border acquisition activity. The results also demonstrate that managerial discretion, arising from the firm’s external industry context, accentuates the positive relationship between both the value of CEO in-the-money stock options and retirement pay with cross-border acquisition activity.Practical implicationsThe findings provide implication for practice as understanding how retirement pay and stock options, both of which make up a substantial portion of overall CEO pay in the USA, motivate cross-border acquisition activity, may improve decisions by executives. The evidence also provides guidance to boards of directors who are charged with the responsibility of creating CEO compensation contracts.Originality/valueThe paper fills important gaps in the existing research on the influence of compensation elements on firm outcomes, by offering a novel explanation for how in-the-money stock options and retirement pay affect CEOs’ motivations to engage in cross-border acquisitions. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Strategy and Management Emerald Publishing

Gold for now and the golden years

Journal of Strategy and Management , Volume 11 (3): 22 – Aug 10, 2018

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Publisher
Emerald Publishing
Copyright
© Emerald Publishing Limited
ISSN
1755-425X
DOI
10.1108/jsma-08-2017-0062
Publisher site
See Article on Publisher Site

Abstract

The purpose of this paper is to draw from regulatory focus theory, to examine the effects of the “gain/no gain” nature of stock options and retirement pay on the decision to engage in cross-border acquisitions. The moderating effects of managerial discretion arising from the external industry context and internal organizational leadership structure are also examined.Design/methodology/approachThe authors employ random effects negative binomial regression analysis with a longitudinal (2006–2016) data set of US public companies operating in four industries with differing levels of industry discretion: the oil and gas, paper and packaging, aerospace and defense, and telecommunications.FindingsThe findings indicate that both CEO in-the-money stock options and retirement pay are positively related to cross-border acquisition activity. The results also demonstrate that managerial discretion, arising from the firm’s external industry context, accentuates the positive relationship between both the value of CEO in-the-money stock options and retirement pay with cross-border acquisition activity.Practical implicationsThe findings provide implication for practice as understanding how retirement pay and stock options, both of which make up a substantial portion of overall CEO pay in the USA, motivate cross-border acquisition activity, may improve decisions by executives. The evidence also provides guidance to boards of directors who are charged with the responsibility of creating CEO compensation contracts.Originality/valueThe paper fills important gaps in the existing research on the influence of compensation elements on firm outcomes, by offering a novel explanation for how in-the-money stock options and retirement pay affect CEOs’ motivations to engage in cross-border acquisitions.

Journal

Journal of Strategy and ManagementEmerald Publishing

Published: Aug 10, 2018

Keywords: Regulatory focus theory; Cross-border acquisitions; CEO stock options; Managerial discretion; CEO retirement pay; Situational promotion focus

References