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Diem Nguyen has studied executive compensation in large Swedish firms


You recently defended your thesis in financial economics, Essays on Takeovers and Executive Compensation. Can you tell us what it is about?

My thesis has two topics, takeovers, or mergers and acquisitions, and executive compensation. The first two chapters of the thesis provide comparative analyses between the US and other countries in terms of takeover premiums, synergistic gains and gain division between acquirers and targets. This comparison is motivated by two observations, first, the prevalence of US evidence in the takeover literature, and second, distinct features of the US in global takeover markets such as size, activities and regulations. The last chapter examines CEO compensation in Swedish foundation-controlled firms.

What did you find?
I find that takeover premiums differ around the world and premiums are particularly high in the US, that is acquirers pay significantly more for an American firm than for firms outside the US. This finding is based on a large sample of about 8,000 takeovers, announced 2000-2013, in 67 countries. When focusing on domestic takeovers in major takeover markets, I find that synergistic gains are similar across countries, but target firms in the US capture a larger part of the gains compared to non-US targets.

Why do you think that is the case?
I explore country variation in investor protection, size of the economy, financial market development, intensity of corporate control transactions, differences in corporate governance between the acquirer and the target countries, and potential benefits of US firms to non-US acquirers. The size of the economy (GDP) is the most relevant factor in explaining the premium gap between US and non-US targets. So it could be competition that drives premiums. There’s still a significant part of the premium gap unexplained by size. Thus, there could be other factors such as US exclusive anti-takeover provisions, for example poison pills. The findings of the second chapter (based on major markets) suggest that acquirers pay more for US targets not because US takeovers create more value, but because target firms have stronger bargaining power in the US than in other countries.

Poison pills?
That's an expression referring to a tactic used by a firm threatened with an unwelcome takeover bid to make itself unattractive to the bidder.

You also looked at compensations to CEO:s in foundation-controlled firms, like the Wallenberg foundation. What is significant for this type of firms?
Yes, foundation ownership and control is a very special type of ownership, since foundations, unlike regular stockholders, do not personally consume the cash flow rights. This theoretically implies weaker incentives for direct monitoring. I investigated CEO compensation as an alternative disciplining device in foundation controlled firms. I looked at executive compensation in Swedish family firms listed on the Stockholm Stock Exchange and found that firms controlled by a foundation reward their CEO:s more than direct family controlled firms, and pay differences are mainly driven by the more pronounced use of option grants in foundation firms.

How can this be explained?
I argue that the absence of security benefits make direct monitoring too costly for foundation firms. Hence, they resort to alternative governance mechanisms such as executive compensation.

What is your academic background?
I took my Bachelor’s degree in Hanoi, Vietnam, and then worked for three years. A friend of mine recommended the Master’s Programme here at the School of Business, Economics and Law, which I started in 2008. At that time I had no plans of continuing further studies, but it was interesting and I was encouraged to apply to the doctoral programme in Economics, which I am very happy that I did.

Now that you have completed your doctoral studies what will you do next?
In September I will start a new job as assistant professor at University of Navarra/ Pamplona in Navarra, Spain. I will teach financial accounting but also continue my research projects and start some new ones also related to takeovers and private equity.

Download the thesis "Essays on Takeovers and Executive Compensation"