Title page for ETD etd-07032011-134734


Document Type Master's Dissertation
Author Slabbert, Sean
URN etd-07032011-134734
Document Title Do CEOs of target firms award themselves more options prior to a takeover?
Degree MBA
Department Gordon Institute of Business Science
Supervisor
Advisor Name Title
Prof M Ward Supervisor
Keywords
  • options
  • target company
  • market signaling
  • insider trading
  • CEO behaviour
Date 2010-11-10
Availability unrestricted
Abstract

Stock options increasingly feature as part of CEO compensation, and there is evidence that CEOs of South African listed target companies engage in the practice of awarding themselves more options prior to takeover. This finding is consistent with CEO behaviour of foreign companies as explained by literature.

After the recent financial crisis of 2008, there is a greater likelihood that financially stable companies might consider acquiring struggling companies with attractive potential future earnings. By gaining insight into the practices of stock option grants to CEOs, acquiring companies can ensure fair practice as well as not paying an undue premium for a target company.

This study was conducted using a sample of 39 Johannesburg stock exchange (JSE) listed target companies, which were acquired during the period 2005- 2009. The focus was on the number of options awarded prior to the announcement date of the takeover in relation to subsequent options awarded. A median test, together with a Chi-squared test was used to evaluate the independence of option grants prior to acquisition and the actual acquisition transaction. Strong evidence was found that these two activities are not independent.

Copyright 2010, University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria

Please cite as follows:

Slabbert, S 2010, Do CEOs of target firms award themselves more options prior to a takeover?, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-07032011-134734/>

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