Industry Experience of Board CEO, and Acquisition Performance

Review of Pacific Basin Financial Markets and Policies, Forthcoming

57 Pages Posted: 29 May 2019

See all articles by Debarati Bhattacharya

Debarati Bhattacharya

Duquesne University

Ya-Yun Kao

CTBC Bank

Wei-Hsien Li

National Central University at Taiwan - Department of Finance

Date Written: April 26, 2019

Abstract

This study examines the collective impact of expert boards and CEOs on acquisition performance, providing new insight into the CEO-board relationship. Acquiring firms with expert boards earn an additional 1.16 percentage points when their CEOs are new to the target industry compared to firms with “non-experienced” boards. However, compared to firms with expert boards alone, acquiring firms with expert boards earn an additional 3.91 percentage points when their CEOs are also experts in the target industry. Robust to endogeneity checks, our evidence supports the vigilant-advisor, resource provisioning, and “shared experience” hypotheses that take three distinct views of the CEO-board relationship. Generalist CEOs and public targets intensify the shared experience effect, whereas less powerful CEOs and private targets intensify the resource provisioning effect. Finally, experienced directors improve the quality of acquisitions by assisting acquirers to avoid large losses, identify targets with higher synergies, and negotiate better deals.

Keywords: M&A, CEO-Board Relationship, CEOs, Outside Directors, Industry Experience

JEL Classification: G34, G14

Suggested Citation

Bhattacharya, Debarati and Kao, Ya-Yun and Li, Wei-Hsien, Industry Experience of Board CEO, and Acquisition Performance (April 26, 2019). Review of Pacific Basin Financial Markets and Policies, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3382265 or http://dx.doi.org/10.2139/ssrn.3382265

Debarati Bhattacharya (Contact Author)

Duquesne University ( email )

600 Forbes Ave.
Pittsburgh, PA 15282
United States
412.396.2621 (Phone)

HOME PAGE: http://www.duq.edu/academics/schools/business/faculty/bhattacharya-phd-debarati

Ya-Yun Kao

CTBC Bank ( email )

25F, No.168, Jingmao 2nd road, Nangang District
Taipei, 115
Taiwan

Wei-Hsien Li

National Central University at Taiwan - Department of Finance ( email )

No. 300, Jung-da Rd.
Jung-Li
Taoyuan
Taiwan

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