Do Busy Directors and CEOs Shirk Their Responsibilities? Evidence from Mergers and Acquisitions
56 Pages Posted: 21 Aug 2014
Date Written: August 19, 2014
We examine the effects of busy directors on merger premiums and conclude that busy directors are not uniformly detrimental. We provide evidence that busy CEOs of acquirer firms are associated with lower premiums suggesting they do not shirk their responsibilities. Busy CEOs of target firms either accept lower premiums or do not play a significant role in determining the price, indicating they may either shirk or have hidden self-incentives. We find that when the majority of directors in target firms are busy, they negotiate better deals. The results show that busyness does not fully explain whether a CEO or director shirks responsibility. Additionally, our results confirm previous findings that the market reacts more negatively to high merger premiums.
Keywords: Multiple directorships, Merger and acquisition, Acquirer busy CEO, Target busy CEO
JEL Classification: G32, G34
Suggested Citation: Suggested Citation