The Effect of Director Experience on Acquisition Performance
54 Pages Posted: 16 Sep 2012 Last revised: 29 Oct 2016
Date Written: April 12, 2016
Prior research finds that firms hire directors for their acquisition experience, regardless of acquisition quality (whether their prior acquisitions earned positive or negative announcement returns). Using several short- and long-run measures, we examine the effects of directors’ acquisition experience on the acquisition performance of firms hiring them. We find that board acquisition experience is positively related to subsequent acquisition performance, demonstrating that firms appropriately value experience. Beyond experience itself, however, the quality of directors’ prior acquisitions is also important. Our results suggest that firms may be better served to select directors based upon both past acquisition experience and acquisition performance.
Keywords: corporate governance, board of directors, mergers and acquisitions
JEL Classification: G30, G34, J24
Suggested Citation: Suggested Citation