Governance Mandates, Outside Directors, and Acquirer Performance
59 Pages Posted: 10 Nov 2016 Last revised: 6 Apr 2017
Date Written: November 1, 2016
We use hand-collected board data around the issuance of two distinct government-led board structure mandates in the U.K. to establish the effect of outside directors on acquirer performance. Increases in outside director representation are associated with better acquirer returns in deals involving listed targets, but not when the target is private. These results are consistent with greater outside director reputational exposure when publicity is high. While we do not advocate mandated board structures, our evidence suggests that the particular diktats we examine were associated with improved acquirer performance in public firm takeovers. We present corroborating evidence from the U.S. around a similar reform period.
Keywords: Board Structures, Mergers, Corporate Governance
JEL Classification: G14, G34, G38
Suggested Citation: Suggested Citation