Independence of board leadership of acquirers and the success of mergers and acquisitions

Edward R. Lawrence, Thanh D. Nguyen and Arun Upadhyay

Journal of Corporate Finance, 2024, vol. 86, issue C

Abstract: Effective board monitoring prevents entrenched managers from undertaking acquisitions that are detrimental to shareholders. It also facilitates a smooth transition during the post-acquisition phase. We examine how independent board leadership affects M&A outcomes. Controlling for many firm, board, and CEO attributes, we find that acquirers with independent board chairpersons earn significantly higher CAR around M&A announcements. The positive effects of independent board chairpersons are more pronounced in acquirers with high monitoring needs. The boards led by independent chairpersons primarily add value by selecting targets with high synergetic gains, avoiding overpaying for targets, and facilitating smooth transition in the post-acquisition phase.

Keywords: Independent chairperson; Acquirer announcement returns; Synergies; Long-run performance (search for similar items in EconPapers)
JEL-codes: G34 G38 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:corfin:v:86:y:2024:i:c:s0929119924000439

DOI: 10.1016/j.jcorpfin.2024.102581

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