Board Connections and M&A Transactions
Santa Clara University - Leavey School of Business
Indiana University - Kelley School of Business - Department of Finance
Journal of Financial Economics (JFE), Forthcoming
We examine M&A transactions between firms with current board connections and find that acquirers obtain higher announcement returns in transactions with a first-degree connection where the acquirer and the target share a common director. Acquirer returns are also higher in transactions with a second-degree connection where one acquirer director and one target director serve on the same third board. Our results suggest that first-degree connections benefit acquirers with lower takeover premiums while second-degree connections benefit acquirers with greater value creation. Overall, we provide new evidence that board connectedness plays important roles in corporate investments and leads to greater value creation.
Number of Pages in PDF File: 58
Keywords: Mergers and acquisitions, acquirer returns, board connections
JEL Classification: G34
Date posted: October 19, 2009 ; Last revised: May 14, 2014
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