Mieszko Mazur
| Date of PhD defense: | 22 December 2010 |
| Title of thesis: | Essays on Managerial Remuneration, Organizational Structure and Non-Cash Divestitures |
| ISBN: | 978 90 5668 269 9 |
| Promotor: | Prof.dr. Luc Renneboog |
Abstract:
This thesis tackles problems related to the efficiency of executive compensation, investment policy and value of public enterprises undergoing significant structural reorganization. The first essay documents that top management receive substantially higher compensation in the year the company undergoes reorganization and breaks up into a number of independent firms. This increase in pay is more pronounced for the CEOs and stems largely from lavish stock option and restricted stock grants. Controlling for a comprehensive set of governance and economic variables, the analysis shows that influential CEOs, who have more control over the decision-making process including the restructuring program, are paid significantly higher. Moreover, it demonstrates that incentivized managers are associated with higher firm value. This relationship is particularly pronounced for firms which turn around their operations as the result of the transaction. The second essay studies the efficiency of managerial incentives in internal capital markets. Consistent with the finance theory, the analysis reveals that in internal capital markets the incentives are designed and administered in a sub-optimal way. Moreover, it shows that a divestiture does not constitute a solution to the agency conflicts that arise inside a multiple business firm. To the contrary, the evidence suggests that a divestiture may be used as a vehicle to derive private benefits of control, a result which contradicts theoretical predictions found in Scharfstein and Stein (2000). The last essay investigates acquisition related motives for undertaking corporate spin-offs. The results show that the spun-off firms invest intensively in M&A. A typical spin-off firm is a more active acquirer than a comparable IPO or mature firm, both in terms of M&A value and M&A volume. More importantly, the acquisitions made by the spun-off firms are profitable, a result consistent with the view that small firms are less prone to managerial hubris. Also, the analysis demonstrates that cash acquisitions are financed by debt rather than equity issues and that firms with higher level of cash reserves are more likely to use stock as an M&A consideration.
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