Board connections and M&A transactions

Ye Cai and Merih Sevilir

Journal of Financial Economics, 2012, vol. 103, issue 2, 327-349

Abstract: We examine M&A transactions between firms with current board connections and find that acquirers obtain higher announcement returns in transactions with a first-degree connection where the acquirer and the target share a common director. Acquirer returns are also higher in transactions with a second-degree connection where one acquirer director and one target director serve on the same third board. Our results suggest that first-degree connections benefit acquirers with lower takeover premiums while second-degree connections benefit acquirers with greater value creation. Overall, we provide new evidence that board connectedness plays important roles in corporate investments and leads to greater value creation.

Keywords: Mergers and acquisitions; Acquirer returns; Board connections (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (171)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:103:y:2012:i:2:p:327-349

DOI: 10.1016/j.jfineco.2011.05.017

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