Abstract
We investigate whether acquisition experience of executive and non-executive directors is priced in their remuneration contracts. Acquisition experience generates a contractual premium, and the relative size of this premium is higher for non-executive directors than for executives. Only a director’s track record related to past successful acquisitions is priced. Acquisition experience of a director is not remunerated if this type of experience is already abundantly present in the firm through the firm’s past acquisition record (substitution effect). We verify the results by examining potential endogeneity concerns, by analyzing a broad set of measures of acquisition experience (such as industry-specific, broad or international experience, experience on a target’s board), and by ruling out alternative explanations (such as a director’s general skills level or reputation, the CEO’s power and delegation attitude, and the firm’s corporate governance quality).