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Board connections and M&A transactions

  • Cai, Ye
  • Sevilir, Merih
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    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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    File URL: http://www.sciencedirect.com/science/article/pii/S0304405X11002170
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    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
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505576

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