Bidders' board structure and acquisition returns

Ray Donnelly

International Journal of Corporate Governance, 2009, vol. 1, issue 3, 315-335

Abstract: The extant academic evidence is, at best, mixed regarding whether bidders gain from their acquisitions. It suggests that many, arguably most, acquirers fail to add to shareholder value through their bids. This paper proposes and explains why companies with boards of directors, which are relatively independent of management, should make better acquisition bids. This prediction is tested using financial event study methodology. Evidence that Cumulative Abnormal Return (CAR) on acquisition is significantly positive for companies with independent boards is reported. Furthermore, these companies have significantly higher abnormal returns (ARs) than those with non-independent boards.

Keywords: acquisitions; abnormal returns; wealth; corporate governance; board of directors; shareholder value; acquisition bids; financial event study. (search for similar items in EconPapers)
Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijcgov:v:1:y:2009:i:3:p:315-335

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