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The Effect of Board Structure on Bidder-Shareholders' Wealth: Further Evidence from the UK Bidding Firms

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  • Charalambos Th. Constantinou
  • Costas Th. Constantinou
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    Abstract

    In this study we provide evidence of cross-sectional dependence of bidder-shareholder wealth and target’s board characteristics. More specifically we provide evidence that the percentage of non-executives, the board size, the stock holdings of executives, and the other directorships held by non-executives serving the target board are important in assessing the announcement of the bid, whereas in the bidder’s board only the percentage of non-executive directors is important for bidder-shareholders. In addition to that we provide evidence that some of these relationships are not monotonic in nature. Finally, in this study it is documented that bidder-shareholder wealth is favoured in acquisitions where bidders have marginally more executive than non-executive directors in their boards and therefore the question arises as to whether “dependent” boards are more efficient than “independent” ones.

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    File URL: http://www.cbr.cam.ac.uk/pdf/WP261.pdf
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    Bibliographic Info

    Paper provided by ESRC Centre for Business Research in its series ESRC Centre for Business Research - Working Papers with number wp261.

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    Date of creation: Jun 2003
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    Handle: RePEc:cbr:cbrwps:wp261

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    Web page: http://www.cbr.cam.ac.uk/

    Related research

    Keywords: Takeovers; Board Characteristics; Corporate Governance; Shareholder-wealth;

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    1. Roll, Richard, 1986. "The Hubris Hypothesis of Corporate Takeovers," The Journal of Business, University of Chicago Press, vol. 59(2), pages 197-216, April.
    2. Franks, Julian R & Harris, Robert & Mayer, Colin, 1987. "Means of Payment in Takeovers: Results for the UK and US," CEPR Discussion Papers 200, C.E.P.R. Discussion Papers.
    3. Julian R. Franks & Robert S. Harris & Cohn Mayer, 1988. "Means of Payment in Takeovers: Results for the United Kingdom and the United States," NBER Chapters, in: Corporate Takeovers: Causes and Consequences, pages 221-264 National Bureau of Economic Research, Inc.
    4. Randall Morck & Andrei Shleifer & Robert W. Vishny, 1988. "Alternative Mechanisms for Corporate Control," NBER Working Papers 2532, National Bureau of Economic Research, Inc.
    5. Franks, J R & Broyles, J E & Hecht, M J, 1977. "An Industry Study of the Profitability of Mergers in the United Kingdom," Journal of Finance, American Finance Association, vol. 32(5), pages 1513-25, December.
    6. Ikenberry, David & Lakonishok, Josef, 1993. "Corporate Governance through the Proxy Contest: Evidence and Implications," The Journal of Business, University of Chicago Press, vol. 66(3), pages 405-35, July.
    7. Asquith, Paul & Bruner, Robert F. & Mullins, David Jr., 1983. "The gains to bidding firms from merger," Journal of Financial Economics, Elsevier, vol. 11(1-4), pages 121-139, April.
    8. Fama, Eugene F & Jensen, Michael C, 1983. "Agency Problems and Residual Claims," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 327-49, June.
    9. Fama, Eugene F & Jensen, Michael C, 1983. "Separation of Ownership and Control," Journal of Law and Economics, University of Chicago Press, vol. 26(2), pages 301-25, June.
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