Industry Experiences of Board, CEO, and Acquisition Performance

Debarati Bhattacharya (), Ya-Yun Kao () and Wei-Hsien Li
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Debarati Bhattacharya: Palumbo Donahue School of Business, Duquesne University, 600 Forbes Avenue, Pittsburg, PA 15282, USA
Ya-Yun Kao: President Chain Store Corp., 2F., No.65, Dongxing Rd., Xinyi Dist., Taipei City 110, Taiwan, R.O.C.
Wei-Hsien Li: Department of Finance, National Central University, No. 300, Zhongda Road, Zhongli District, Taoyuan City 32001, Taiwan, R.O.C.

Review of Pacific Basin Financial Markets and Policies (RPBFMP), 2020, vol. 23, issue 03, 1-48

Abstract: This study examines the collective impact of expert boards and CEOs on acquisition performance, providing new insight into the CEO–board relationship. Acquiring firms with expert boards earns an additional 1.16 percentage points (3.91 percentage points) when the CEOs are new to the target industry (also experts) compared to the firms with “nonexperienced” boards (expert boards alone). Robust to endogeneity checks, our evidence supports the “vigilant-advisor”, “resource-provisioning”, and “shared-experience” hypotheses that take three distinct views of the CEO–board relationship. Generalist CEOs and public targets intensify the shared-experience effect, whereas less powerful CEOs and private targets intensify the resource-provisioning effect. Experienced directors improve the quality of acquisitions by assisting acquirers to avoid large losses, identify targets with higher synergies, and negotiate better deals.

Keywords: M&A; CEO–board relationship; CEOs; outside directors; industry experience (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S0219091520500228

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