International Acquisition and CEO Compensation (WITHDRAWN)

Agency theory suggests that a primary motivation for acquisitions is empire-building, implying that post-acquisition CEO compensation should be higher. Stewardship theory suggests that CEOs manage corporate resources for the long-term interest of the firm, and acquisitions should not necessarily increase CEO compensation. We examine these conflicting views and report that CEO compensation increases following both domestic and international acquisitions of US firms, consistent with the agency theory. However, the expectation that international acquisitions lead to higher CEO compensation than domestic acquisitions due to greater complexity was not borne out. Moreover, both domestic and international acquisitions lead to more incentive-based compensation. Unrelated acquisitions are associated with higher CEO compensation than related acquisitions due to the cost of industry diversification.