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Board composition after mergers, does it matter to target shareholders?

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  • Wang, Hongxia
  • Sakr, Sameh
  • Ning, Yixi
  • Davidson III, Wallace N.

Abstract

This 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.

Suggested Citation

  • Wang, Hongxia & Sakr, Sameh & Ning, Yixi & Davidson III, Wallace N., 2010. "Board composition after mergers, does it matter to target shareholders?," Journal of Empirical Finance, Elsevier, vol. 17(5), pages 837-851, December.
    • Handle: RePEc:eee:empfin:v:17:y:2010:i:5:p:837-851
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    References listed on IDEAS

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    2. Chistopher Day & Martin Bugeja & Helen Spiropoulos & Zoltan Matolcsy, 2023. "Non‐executive directorship importance and takeover hostility: Australian evidence," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 63(1), pages 769-793, March.
    3. Guo, Jie & Li, Xi & Seeger, Nicolas Cisternas & Vagenas-Nanos, Evangelos, 2019. "Social connections, reference point and acquisition premium," The British Accounting Review, Elsevier, vol. 51(1), pages 46-71.
    4. Kiosses, Nikolaos & Leventis, Stergios & Subeniotis, Demetres & Tampakoudis, Ioannis, 2025. "The impact of policy uncertainty on shareholder wealth: Evidence from bank M&A," Journal of Financial Stability, Elsevier, vol. 76(C).
    5. Ioannis Tampakoudis & Andreas Andrikopoulos & Michail Nerantzidis & Nikolaos Kiosses, 2022. "Does boardroom gender diversity affect shareholder wealth? Evidence from bank mergers and acquisitions," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 3315-3344, July.
    6. Benson, Bradley W. & Davidson, Wallace N. & Davidson, Travis R. & Wang, Hongxia, 2015. "Do busy directors and CEOs shirk their responsibilities? Evidence from mergers and acquisitions," The Quarterly Review of Economics and Finance, Elsevier, vol. 55(C), pages 1-19.

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