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Board connections and M&A transactions

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  • Cai, Ye
  • Sevilir, Merih
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    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.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Financial Economics.

    Volume (Year): 103 (2012)
    Issue (Month): 2 ()
    Pages: 327-349

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    Handle: RePEc:eee:jfinec:v:103:y:2012:i:2:p:327-349

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    Web page: http://www.elsevier.com/locate/inca/505576

    Related research

    Keywords: Mergers and acquisitions; Acquirer returns; Board connections;

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    References

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    Cited by:
    1. Fang, Yiwei & Francis , Bill & Hasan, Iftekhar, 2012. "More than connectedness – Heterogeneity of CEO social network and firm value," Research Discussion Papers 26/2012, Bank of Finland.

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