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Independence of board leadership of acquirers and the success of mergers and acquisitions

Author

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  • Lawrence, Edward R.
  • Nguyen, Thanh D.
  • Upadhyay, Arun

Abstract

Effective board monitoring prevents entrenched managers from undertaking acquisitions that are detrimental to shareholders. It also facilitates a smooth transition during the post-acquisition phase. We examine how independent board leadership affects M&A outcomes. Controlling for many firm, board, and CEO attributes, we find that acquirers with independent board chairpersons earn significantly higher CAR around M&A announcements. The positive effects of independent board chairpersons are more pronounced in acquirers with high monitoring needs. The boards led by independent chairpersons primarily add value by selecting targets with high synergetic gains, avoiding overpaying for targets, and facilitating smooth transition in the post-acquisition phase.

Suggested Citation

  • Lawrence, Edward R. & Nguyen, Thanh D. & Upadhyay, Arun, 2024. "Independence of board leadership of acquirers and the success of mergers and acquisitions," Journal of Corporate Finance, Elsevier, vol. 86(C).
    • Handle: RePEc:eee:corfin:v:86:y:2024:i:c:s0929119924000439
    DOI: 10.1016/j.jcorpfin.2024.102581
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    More about this item

    Keywords

    Independent chairperson; Acquirer announcement returns; Synergies; Long-run performance;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation

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