The effect of interlocking directorates on mergers and acquisitions in Brazil

This study investigates the effect of interlocking directorates on national and international mergers and acquisitions (M&A) in Brazil. Based on a sample of 153 large Brazilian firms in a time series (2000–2015), and using network techniques and regression analysis, this study addresses the hypothesis: board interlocking reduces the asymmetry of information in M&A, leading companies with a greater number of ties (degree centrality) to be more likely to participate in M&A. The results show that firms that have a larger number of ties with other firms through board interlocks (higher degree centrality) are more likely to perform M&A. Other network measures (closeness, eigenvector, betweenness, and structural holes) have no significant impact on the likelihood to participate in M&A. This study examines the impact of board interlocking on firms’ propensity to undertake M&A while controlling for financial, corporate governance, and country-level governance variables in the explanatory model. This paper also contributes by identifying the determinants of M&A performed by companies headquartered in emerging countries such as Brazil, a major participant in M&A processes at the international level.