The dark side of well-connected directors: Evidence from private firm acquisitions

Dien Giau Bui, Huimin Chung, Chih-Yung Lin and Kuang-Chih Tsao

International Review of Financial Analysis, 2024, vol. 96, issue PB

Abstract: We adopt a difference-in-difference approach to investigate the relationship between the board network and the acquirer's cumulative abnormal returns (CAR) by examining the influence of the directors' sudden death or retirement. We find that firms experiencing the departure of well-connected directors tend to obtain higher CAR when acquiring private targets. This suggests that well-connected directors may reduce the values of mergers and acquisitions (M&A). However, acquirers with greater external monitoring can reduce this negative effect. We also find that these directors with prior acquisition experience are more likely to secure board positions. In summary, these results support the agency problem that well-connected directors tend to make more M&A deals for their private benefits.

Keywords: Board networks; Mergers and acquisitions; Acquirer returns; Social connections; Private benefits (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S105752192400615X
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:96:y:2024:i:pb:s105752192400615x

DOI: 10.1016/j.irfa.2024.103683

Access Statistics for this article

International Review of Financial Analysis is currently edited by B.M. Lucey

More articles in International Review of Financial Analysis from Elsevier
Bibliographic data for series maintained by Catherine Liu ().