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March 5, 2002
WALTHAM, Mass. - Sudip Datta, Robert and Julia Dorn Professor of Finance at Bentley College, is available as an expert resource on the topic of executive compensation. Datta coauthored a recent study which links the value of corporate acquisition decisions to how corporate executives are paid. The study significantly advances knowledge in two important areas of finance - executive compensation and mergers and acquisitions.
"Executive Compensation and Corporate Acquisition Decisions," published in the in the Journal of Finance (Spring 2001), was coauthored by Datta and two colleagues, Bentley Assistant Professor of Finance Kartik Raman and Mai Iskandar-Datta, associate professor of Finance at Suffolk University. The trio found that the more new stock options top managers are given, the better merger and acquisition decisions they make. "We examined mergers and acquisitions because they're the only externally observable and major investment decision managers make on behalf of shareholders," explains Datta. "We found that there"s a direct correlation between how the market reacts to an M & A announcement and how executives are paid."
The trio studied a sample of more than 1,700 mergers and acquisitions completed by U.S. firms over a five-year period, January 1993 to December 1998. The group included corporate giants such as Procter & Gamble, Hilton Hotels, Qwest Communications and Comverse Technology. They examined how the market responded to acquisition announcements by companies with different executive compensation contracts, focusing on equity-based compensation (new stock option grants) awarded to the top five executives at the acquiring firm in the year prior to the acquisition.
Key findings of the study are available at http://ecampus.bentley.edu/bl/bl041101/datta.html.
BENTLEY UNIVERSITY is one of the nation’s leading business schools, dedicated to preparing a new kind of business leader – one with the deep technical skills, broad global perspective, and high ethical standards required to make a difference in an ever-changing world. Our rich, diverse arts and sciences program, combined with an advanced business curriculum, prepares informed professionals who make an impact in their chosen fields. Located on a classic New England campus minutes from Boston, Bentley is a dynamic community of leaders, scholars and creative thinkers. The McCallum Graduate School emphasizes the impact of technology on business practice, in offerings that include MBA and Master of Science programs, PhD programs in accountancy and in business, and customized executive education programs. The university enrolls approximately 4,100 full-time undergraduate, 140 adult part-time undergraduate, 1,430 graduate, and 43 doctoral students. Bentley is accredited by the New England Association of Schools and Colleges; AACSB International – The Association to Advance Collegiate Schools of Business; and the European Quality Improvement System, which benchmarks quality in management and business education.
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