Group Polarization on Corporate Boards: Theory and Evidence on Board Decisions About Acquisition Premiums
David H. Zhu
Arizona State University (ASU) - W. P. Carey School of Business
Strategic Management Journal, Vol. 34, No.7, pp. 800-822, 2013
This study investigates how group polarization can influence boards’ acquisition premium decisions. The theory suggests that when prior premium experience would lead directors on average to support a relatively high premium prior to board discussions, they will support a focal premium that is even higher after discussions; but when directors’ prior premium experience would lead them on average to support a relatively low premium prior to board discussions, they will support a focal premium that is even lower after discussions. Results provided strong support for the theory. Moreover, group polarization was reduced by demographic homogeneity among directors and minority expertise but increased by board influence. This study introduces a fundamental group decision-making bias into governance research and explains how group processes can influence network diffusions.
Number of Pages in PDF File: 42
Keywords: corporate governance; board of directors; interlock network diffusion; group dynamics; group polarization
Date posted: April 17, 2014 ; Last revised: August 15, 2015
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