Target Director Turnover in Acquisitions: A Conceptual Framework
Manuscript Type: Conceptual Research Question/Issue: Director turnover post-acquisition is a complex and multi-faceted phenomenon that needs to be examined beyond the agency lens. In this article, we examine the likelihood of non-executive director turnover in target firms following an acquisition. Research Findings/Insight: Acquisitions present an interesting case where conflict of interests may arise between shareholders and directors. This study proposes that the likelihood of target non-executive director turnover depends on the factors that determine the performance of directors in their monitoring, advisory and social roles pre-acquisition and during the acquisition process. Theoretical/Academic Implications: While there are multiple studies examining the likelihood of turnover of executive directors (TMTs) following an acquisition, there is no systematic conceptual research explaining the likelihood of turnover of non-executive directors. We draw on three theoretical perspectives--agency theory, resource based view and the social capital perspective to comprehensively investigate target non-executive director turnover postacquisition. We further clarify the boundaries of these theoretical arguments concerning their implications for target non-executive director turnover. Practitioner/Policy Implications: One of the most important tasks for the newly formed firm post-acquisition is to build the new leadership team, including a new board. In view of the important roles directors take on in modern corporations, it is critical to understand how the new board should be constituted and what members of the target firm are more likely to join that new board.
|Date of creation:||May 2008|
|Date of revision:|
|Contact details of provider:|| Web page: http://www.business.uiuc.edu/Working_Papers/Main.asp|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Kini, Omesh & Kracaw, William & Mian, Shehzad, 1995. "Corporate takeovers, firm performance, and board composition," Journal of Corporate Finance, Elsevier, vol. 1(3-4), pages 383-412, April.
- Farrell, Kathleen A & Whidbee, David A, 2000. "The Consequences of Forced CEO Succession for Outside Directors," The Journal of Business, University of Chicago Press, vol. 73(4), pages 597-627, October.
- Scott Shane & Daniel Cable, 2002. "Network Ties, Reputation, and the Financing of New Ventures," Management Science, INFORMS, vol. 48(3), pages 364-381, March.
- Sahlman, William A., 1990. "The structure and governance of venture-capital organizations," Journal of Financial Economics, Elsevier, vol. 27(2), pages 473-521, October.
- Cotter, James F. & Zenner, Marc, 1994. "How managerial wealth affects the tender offer process," Journal of Financial Economics, Elsevier, vol. 35(1), pages 63-97, February.
- Mark R. Huson, 2001. "Internal Monitoring Mechanisms and CEO Turnover: A Long-Term Perspective," Journal of Finance, American Finance Association, vol. 56(6), pages 2265-2297, December.
- Repullo,R. & Suarez,J., 1995.
"Monitoring,Liquidation,and Security Design,"
9520, Centro de Estudios Monetarios Y Financieros-.
- Gorman, Michael & Sahlman, William A., 1989. "What do venture capitalists do?," Journal of Business Venturing, Elsevier, vol. 4(4), pages 231-248, July.
- 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.
- Romano, Claudio A. & Tanewski, George A. & Smyrnios, Kosmas X., 2001. "Capital structure decision making: A model for family business," Journal of Business Venturing, Elsevier, vol. 16(3), pages 285-310, May.
- Humphry Hung, 1998. "A typology of the theories of the roles of governing boards," Corporate Governance: An International Review, Wiley Blackwell, vol. 6(2), pages 101-111, 04.
- Yuval Deutsch & Thomas W. Ross, 2003. "You are Known by the Directors You Keep: Reputable Directors as a Signaling Mechanism for Young Firms," Management Science, INFORMS, vol. 49(8), pages 1003-1017, August.
- Joshua Lerner, 1994. "The Syndication of Venture Capital Investments," Financial Management, Financial Management Association, vol. 23(3), Fall.
- Gompers, Paul A, 1995. " Optimal Investment, Monitoring, and the Staging of Venture Capital," Journal of Finance, American Finance Association, vol. 50(5), pages 1461-89, December.
- Teece, David J. & Rumelt, Richard & Dosi, Giovanni & Winter, Sidney, 1994. "Understanding corporate coherence : Theory and evidence," Journal of Economic Behavior & Organization, Elsevier, vol. 23(1), pages 1-30, January.
- Hellmann, Thomas F. & Puri, Manju, 2000.
"Venture Capital and the Professionalization of Start-up Firms: Empirical Evidence,"
1661, Stanford University, Graduate School of Business.
- Thomas Hellmann & Manju Puri, 2002. "Venture Capital and the Professionalization of Start-Up Firms: Empirical Evidence," Journal of Finance, American Finance Association, vol. 57(1), pages 169-197, 02.
- Darwin V. Neher, 1999. "Staged Financing: An Agency Perspective," Review of Economic Studies, Oxford University Press, vol. 66(2), pages 255-274.
- Harford, Jarrad, 2003. "Takeover bids and target directors' incentives: the impact of a bid on directors' wealth and board seats," Journal of Financial Economics, Elsevier, vol. 69(1), pages 51-83, July.
- Sanjeev Bhojraj & Partha Sengupta, 2003. "Effect of Corporate Governance on Bond Ratings and Yields: The Role of Institutional Investors and Outside Directors," The Journal of Business, University of Chicago Press, vol. 76(3), pages 455-476, July.
- Yangmin Kim, 2005. "Board Network Characteristics and Firm Performance in Korea," Corporate Governance: An International Review, Wiley Blackwell, vol. 13(6), pages 800-808, November.
- Randoy, Trond & Goel, Sanjay, 2003. "Ownership structure, founder leadership, and performance in Norwegian SMEs: implications for financing entrepreneurial opportunities," Journal of Business Venturing, Elsevier, vol. 18(5), pages 619-637, September.
- Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
- Philip Stiles, 2001. "The Impact of the Board on Strategy: An Empirical Examination," Journal of Management Studies, Wiley Blackwell, vol. 38(5), pages 627-650, 07.
- Agrawal, Anup & Walkling, Ralph A, 1994. " Executive Careers and Compensation Surrounding Takeover Bids," Journal of Finance, American Finance Association, vol. 49(3), pages 985-1014, July.
- Violina P. Rindova, 1999. "What Corporate Boards have to do with Strategy: A Cognitive Perspective," Journal of Management Studies, Wiley Blackwell, vol. 36(7), pages 953-975, December.
- C. B. Ingley & N. T. Van der Walt, 2001. "The Strategic Board: the changing role of directors in developing and maintaining corporate capability," Corporate Governance: An International Review, Wiley Blackwell, vol. 9(3), pages 174-185, 07.
- Amy J. Hillman, 2000. "The Resource Dependence Role of Corporate Directors: Strategic Adaptation of Board Composition in Response to Environmental Change," Journal of Management Studies, Wiley Blackwell, vol. 37(2), pages 235-256, 03.
- Mary M. Bange, 2004. "Board Composition, Board Effectiveness, and the Observed Form of Takeover Bids," Review of Financial Studies, Society for Financial Studies, vol. 17(4), pages 1185-1215.
- Jeffrey L. Coles & Chun-Keung Hoi, 2003. "New Evidence on the Market for Directors: Board Membership and Pennsylvania Senate Bill 1310," Journal of Finance, American Finance Association, vol. 58(1), pages 197-230, 02.
- Borokhovich, Kenneth A. & Parrino, Robert & Trapani, Teresa, 1996. "Outside Directors and CEO Selection," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 31(03), pages 337-355, September.
- Weisbach, Michael S., 1988. "Outside directors and CEO turnover," Journal of Financial Economics, Elsevier, vol. 20(1-2), pages 431-460, January.
When requesting a correction, please mention this item's handle: RePEc:ecl:illbus:08-0106. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.