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Labor Market Consequences For Busy Directors: Evidence From International Mergers And Acquisitions

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  • Stephen P. Ferris
  • Narayanan Jayaraman
  • Min‐Yu (Stella) Liao

Abstract

Using 13,233 acquisitions from 57 countries, we examine merger and acquisition (M&A) decisions made by busy boards. We find that few busy acquirers originate from emerging markets and that they tend to undertake cross‐border mergers, favor public targets, finance with cash and equity, pursue nondiversifying mergers, avoid targets with multiple bidders, and long‐term underperform relative to nonbusy acquirers. Importantly, we discover a nonlinear relation between an acquirer's board busyness and merger announcement returns. We find that the labor market penalizes directors who approve bad acquisitions but does not reward them for good mergers. We find a similar nonlinear relation between an acquirer's board busyness and its long‐term performance along with a suggestion of an optimal board busyness.

Suggested Citation

  • Stephen P. Ferris & Narayanan Jayaraman & Min‐Yu (Stella) Liao, 2019. "Labor Market Consequences For Busy Directors: Evidence From International Mergers And Acquisitions," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 42(3), pages 449-489, September.
    • Handle: RePEc:bla:jfnres:v:42:y:2019:i:3:p:449-489
    DOI: 10.1111/jfir.12180
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    Cited by:

    1. Melinda Cahyaning Ratri & Iman Harymawan & Khairul Anuar Kamarudin, 2021. "Busyness, Tenure, Meeting Frequency of the CEOs, and Corporate Social Responsibility Disclosure," Sustainability, MDPI, vol. 13(10), pages 1-22, May.

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