Achieve or go against one’s inclinations: the real effect of affiliated directors in vertical M&A

Yali Gu and Wenxuan Han

Applied Economics, 2026, vol. 58, issue 33, 6770-6786

Abstract: In accordance with the principles of transaction cost theory, vertical mergers and acquisitions (M&A) represent an efficacious strategy for mitigating uncertainties and sustaining competitive advantages. However, the effectiveness of vertical mergers is influenced by various internal and external factors. Utilizing panel data regression models and financial data from China’s A-share listed companies spanning 2016 to 2021, we endeavour to elucidate this phenomenon by examining affiliated directors, an internal factor of enterprises, and explore underlying mechanisms. Our analysis reveals that through familiarity bias and integration level of industrial chain, the involvement of affiliated directors in vertical mergers mitigates the effectiveness of uncertainty reduction. This negative impact is more pronounced in firms with a relatively low number of analysts tracking, substantial financing constraints, low profitability, and limited institutional environments in their regions. Empirical results derived from robustness checks and mechanism tests indicate that stringent internal controls, robust regulatory measures, and well-formulated industrial policies are vital for realizing M&A synergies, thereby fostering the high-quality development of listed companies and protecting the interests of investors.

Date: 2026
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DOI: 10.1080/00036846.2025.2526178

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