Board composition after mergers, does it matter to target shareholders?
AbstractThis paper examines whether post-merger board composition affects the premiums paid to target shareholders. Using a sample of 207 stock-for-stock mergers from 1996 to 2004, we show that target merger premiums vary inversely with target director representation on the post-merger board. We also provide some evidence that both inside and outside target directors may trade shareholder wealth for board seats in the combined firms. However, we do not find board ownership moderates the relation between target merger premiums and post-merger board composition. Consistent with previous studies of management incentives in mergers, our empirical evidence supports the non-perfect agency theory. That is, target directors may sacrifice target shareholder interests to obtain a seat on the post-merger board.
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Bibliographic InfoArticle provided by Elsevier in its journal Journal of Empirical Finance.
Volume (Year): 17 (2010)
Issue (Month): 5 (December)
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Web page: http://www.elsevier.com/locate/jempfin
Board of directors Mergers and acquisitions Non-perfect agents Shareholder wealth;
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