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Board Connections and M&A Transactions

Ye Cai

Santa Clara University - Leavey School of Business

Merih Sevilir

Indiana University - Kelley School of Business

May 2011

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

Accepted Paper Series

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Date posted: October 19, 2009 ; Last revised: March 15, 2012

Suggested Citation

Cai, Ye and Sevilir, Merih, Board Connections and M&A Transactions (May 2011). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: http://ssrn.com/abstract=1491064 or http://dx.doi.org/10.2139/ssrn.1491064

Contact Information

Ye Cai
Santa Clara University - Leavey School of Business ( email )
500 El Camino Real
Santa Clara, CA California 95053
United States
Merih Sevilir (Contact Author)
Indiana University - Kelley School of Business ( email )
1309 East Tenth Street
Indianapolis, IN 47405-1701
United States
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References:  64
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