Mergers and Acquisitions, CEO Compensation, and Corporate Governance in the Hospitality and Tourism Industry

Drawing on agency theory, we explore the relationship between mergers and acquisitions (M&As) and chief executive officer (CEO) compensation in the hospitality and tourism (HT) industry. Specifically, we investigate whether growth via acquisitions, a popular strategy in the HT industry, is influenced by CEO compensation. Using a sample of HT and non-HT firms for comparison from 1992 to 2019, we find that CEO compensation is significantly higher after acquisitions for both HT and non-HT firms. However, when controlling for common compensation determinants, CEO compensation is significantly higher in HT firms but not in non-HT firms. Surprisingly, in our sample, corporate governance is not significantly related to changes in CEO compensation post-acquisition. In addition, while the fraction of cash-based compensation is negatively related to M&A propensity in both HT and non-HT firms, the fraction of equity-based compensation is unrelated to M&A propensity in HT firms. Our study fills an important gap in the sparse literature on the link between M&A and CEO compensation in the HT industry, providing theoretical implications for future research and managerial implications for boards of directors to design compensation plans that align the interests of managers and shareholders.