58 Pages Posted: 19 Oct 2009 Last revised: 5 Oct 2016
Date Written: May 2011
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.
Keywords: Mergers and acquisitions, acquirer returns, board connections
JEL Classification: G34
Suggested Citation: Suggested Citation
Cai, Ye and Sevilir, Merih, Board Connections and M&A Transactions (May 2011). Journal of Financial Economics (JFE), Forthcoming. Available at SSRN: https://ssrn.com/abstract=1491064 or http://dx.doi.org/10.2139/ssrn.1491064