Research On The Impact Of Ceo Compensation Deviation On Corporate M & A Strategy

As one of the important investment behaviors of enterprises,merger and acquisition(M&A)is an effective way for enterprises to expand scale,improve market competitiveness and enrich resource allocation.In the process of M&A,CEO is the most direct executor of M&A strategy,and plays a crucial role in whether M&A can succeed and promote the long-term development of enterprises.As one of the primary mechanisms to achieve the compatibility with managers’ and shareholders’ objectives,the deviation degree of CEO compensation becomes an important factor affecting M&A strategy.According to the reference point contract theory,the CEO compensation reference point effect is the main factor affecting the CEO’s decisionmaking.Under the effect of the reference point contract,the CEO forms the psychological perception of his salary deviation,and further influences the contracting result and governance efficiency.This dissertation,based on reference point contract theory and butler theory,employed A-share listed companies from Shanghai and Shenzhen as research samples,and utilized M&A transaction reports and data to analyze CEO salary deviation.The impacts of CEO salary deviation on strategic M&A were studied by combining text analysis and empirical research.The mechanism between contract reference effect and strategic M&A was explored.Based on the reference point contract theory,compensation deviation caused by reference points is an important factor affecting the incentive perception of CEOs.Giving enough reference incentives to CEOs will prompt them to make more efforts to collect complete information and develop longterm strategic planning when executing M&A strategic decisions.In addition,reasonable salary gap is an important way to motivate the senior management team,which can fully promote the enthusiasm of the senior management team providing the CEO with the strategic information of M&A.Institutional investors,in their positive role in corporate governance,can effectively reduce the opportunistic behavior of CEO.On the other hand,institutional investors also affect the degree of equity checks and balances,and thus have a key impact on enterprise M&A strategy.Due to the differences of salary gap among members in the executive team and the abilities of institutional investors,the CEO salary deviation may have impacts on M&A strategy.This dissertation,based on the empirical results,selected A-share listed companies in Shanghai and Shenzhen from 2015 to 2021 as research samples to analyze the M&A data.It was found that:(1)The positive deviation of CEO compensation is positively correlated with strategic M&A.(2)The salary gap among internal members of the executive team has a negative moderating impact on the relationship between the positive deviation of CEO compensation and strategic M&A.(3)Institutional investors have a positive moderating effect on the relationship between positive deviation of CEO compensation and strategic M&A.The possible contributions of this paper are as follows: first,it explored the behaviors of managers from the perspective of contract reference and break through the previous analysis paradigm of optimal contract theory,so as to enrich the application research of behavioral factors in the topic of corporate governance;Second,it enriched the research of CEO compensation deviation on corporate M&A behavior.The target was on the M&A strategy that can affect the long-term interests of enterprises.It also expanded the empirical evidence on strategic M&A.Thirdly,it helped enterprises to realize that they should pay attention to the reference point effects of CEO’s perception of compensation in the governance process,so as to reasonably design the CEO compensation incentive system.It will arouse CEO to implement positive type of strategic M&A and further improving the efficiency of M&A and optimizing the allocation of enterprise resources.