Does the structure of the board of directors improve M&A performance?

Aleksandra Anna Chadam


Purpose – The research focuses on examining which characteristics can raise or diminish board effectiveness in the context of M&A activities of companies.

Design/methodology/approach – The nature of the research was quantitative, and the sample was selected purposefully. The data was retrieved from four databases: ThomsonOne, Eventus, Institutional Shareholder Platform (ISS) and Compustat. The final sample consisted of 2613 mergers and acquisitions and was selected by applying the following criteria: both the bidder and the target were US-based companies, the acquirer was a listed company, the acquisition announcement took place over the period 2008 – 2017, the deal value exceeded USD 1 million, the transaction resulted in a control gain over the target company. M&A performance was assessed using cumulative abnormal return (CAR) method, while the board influence was examined using ordinary least square (OLS) regression. Five hypotheses regarding the influence of board independence, gender diversity, board size, CEO duality and type of elections were tested in the research.

Findings – Two out of five hypotheses were confirmed in the study. Board independence and board classification increase bidders’ CARs over the deal announcement period.

Research limitations/implications: The main limitation is related to the measurement of M&A performance, which is relatively difficult to quantify. Moreover, the method of selection of the sample, especially a higher proportion of companies from certain industries could affect the outcomes and underestimate the impact of gender diversity. Further research could investigate the deals in the long-term perspective and apply different criteria in the sample selection process.

Practical implications: The outcome of this study is of importance to acquisitive and non-acquisitive companies by aiding them in finding an optimal board structure, which can effectively monitor and motivate the CEO, leading to profitable decisions concerning not only M&A but all major investments.

Originality/value: The study investigates the topic of board effectiveness in the M&A context, which the research coverage is still very limited. The study covers five board characteristics and several control variables to increase the robustness of the results and ensure their correct interpretation. Finally, the sample consists of the most recent data, which enables to draw up-to-date conclusions that consider constantly developing corporate governance law and trends regarding the board structure and composition.


M&A; M&A performance; board effectiveness; board independence; gender diversity; board size; CEO duality; classified board

Full Text:



Ahern, K.R., and Dittmar, A.K. (2012), “The changing of the boards: The impact on fim valuation of mandated female board representation”, The Quarterly Journal of Economics, vol. 127, no. 1, pp. 137–197,

Alexandridis, G., Mavrovitis, C.F., and Travlos, N.G. (2012), “How have M&As changed? Evidence from the sixth merger wave”, The European Journal of Finance, vol. 18, no. 8, pp. 663–688.

Amar, W.B., Boujenoui, A., and Francoeur, C. (2011), “CEO attributes, board composition, and acquirer value creation: A Canadian study”, Canadian Journal of Administrative Sciences / Revue Canadienne des Sciences de l'Administration, vol. 28, no. 4, pp. 480–492,

Baliga, B.R., Moyer, R.C., and Rao, R.S. (1996), “CEO duality and fim performance: What’s the fuss?”, Strategic Management Journal, vol. 17, no. 1, pp. 41–53.

Bebchuk, L.A., Cohen, A. (2005), “The costs of entrenched boards”, Journal of Financial Economics, vol. 78, no. 2, pp. 409–433,

Binder, J. (1998), “The event study methodology since 1969”, Review of Quantitative Finance and Accounting, vol. 11, no. 2, pp. 111–137,

Bøhren, Ø., and Staubo, S. (2014), “Does mandatory gender balance work? Changing organizational form to avoid board upheaval”, Journal of Corporate Finance, vol. 28, pp. 152–168,

Boyd, B.K. (1995), “CEO duality and fim performance: A contingency model”, Strategic Management Journal, vol. 16, no. 4, pp. 301–312,

Brown, D.T., and Ryngaert, M.D. (1991), “The mode of acquisition in takeovers: Taxes and asymmetric information”, The Journal of Finance, vol. 46, no. 2, pp. 653–669,

Bruner, R.F. (2004), Applied Mergers and Acquisitions, Vol. 173, John Wiley & Sons, New York.

Byrd, J.W., and Hickman, K.A. (1992), “Do outside directors monitor managers?: Evidence from tender offer bids”, Journal of Financial Economics, vol. 32, no. 2, pp. 195–221,

Carter, D.A., D’Souza, F., Simkins, B.J., and Simpson, W.G. (2010), “The gender and ethnic diversity of US boards and board committees and firm financial performance”, Corporate Governance: An International Review, vol. 18, no. 5, pp. 396–414,

Chen, C.W., Lin, J.B., and Yi, B. (2008), “CEO duality and fim performance: An endogenous issue”, Corporate Ownership and Control, vol. 6, no. 1, pp. 58–65,

Chung, K.H., and Pruitt, S.W. (1994), “A simple approximation of Tobin’s q”, Financial Management, vol. 23, no. 3, pp. 70–74,

Cremers, K.M., Litov, L.P., and Sepe, S.M. (2017), “Staggered boards and long-term fim value, revisited”, Journal of Financial Economics, vol. 126, no. 2, pp. 422–444,

Daines, R., Li, S.X., and Wang, C.C. (2016), Can staggered boards improve value? Evidence from the Massachusetts natural experiment, working paper, available at: (accessed: 8 May 2018).

Donaldson, L., and Davis, J.H. (1991), “Stewardship theory or agency theory: CEO governance and shareholder returns”, Australian Journal of Management, vol. 16, no. 1, pp. 49–64,

Eisenberg, T., Sundgren, S., and Wells, M.T. (1998), “Larger board size and decreasing firm value in small firms”, Journal of Financial Economics, vol. 48, no. 1, pp. 35–54,

Elsayed, K. (2007), “Does CEO duality really affect corporate performance?”, Corporate Governance: An International Review, vol. 15, no. 6, pp. 1203–1214,

Faleye, O. (2007), ”Classifid boards, fim value, and managerial entrenchment”, Journal of Financial Economics, vol. 83, no. 2, pp. 501–529,

Fama E.F., and Jensen, M.C. (1983), “Separation of ownership and control”, Journal of Law and Economics, vol. 26, no. 2, pp. 301–325,

Fich, E.M., and Shivdasani, A. (2006), ”Are busy boards effective monitors?”, Journal of Finance, vol. 61, no. 2, pp. 689–724,

Hair, J.F., Black, W.C., Babin, B.J., Anderson, R.E., and Tatham, R.L. (1998), Multivariate Data Analysis (vol. 5, no. 3), Prentice Hall, Upper Saddle River, NJ, pp. 207–219.

Hermalin, B.E., and Weisbach, M.S. (1991), “The effects of board composition and direct incentives on fim performance”, Financial Management, vol. 20, no. 4, pp. 101–112,

Huther, J. (1997), “An empirical test of the effect of board size on fim effiiency”, Economics Letters, vol. 54, no. 3, pp. 259–264,

Jensen, M., and Meckling, W. (1976), “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure”, Journal of Financial Economics, vol. 3, no. 4, pp. 305–360,

Jensen, M.C. (1986), “Agency costs of free cash flw, corporate fiance, and takeovers”, The American Economic Review, vol. 76, no. 2, pp. 323–329,

Jensen, M.C. (1993), “The modern industrial revolution, exit, and the failure of internal control systems”, Journal of Finance, vol. 48, no. 3, pp. 831–880,

Koeplin, J., Sarin, A., and Shapiro, A.C. (2000), “The private company discount”, Journal of

Applied Corporate Finance, vol. 12, no. 4, pp. 94–101,

Kosnik, R.D. (1987), “Greenmail: A study of board performance in corporate governance”, Administrative Science Quarterly, vol. 32, no. 2, pp. 163–185,

Kramer, V.W., Konrad, A.M., Erkut, S., and Hooper, M.J. (2006), “Critical mass on corporate boards: Why three or more women enhance governance”, Organizational Dynamics, vol. 37, no. 2, pp. 2–4,

Kroll, M., Walters, B.A., and Wright, P. (2008), “Board vigilance, director experience, and corporate outcomes”, Strategic Management Journal, vol. 29, no. 4, pp. 363–382,

Lang, L.H., Stulz, R., and Walkling, R.A. (1991), “A test of the free cash flw hypothesis: The case of bidder returns”, Journal of Financial Economics, vol. 29, no. 2, pp. 315–335,

Lipton, M., and Lorsch, J.W. (1992), “A modest proposal for improved corporate governance”, The Business Lawyer, vol. 48, no. 1, pp. 59–77,

Lückerath-Rovers, M. (2011), “Women on boards and fim performance”, Journal of Management & Governance, vol. 17, no. 2, pp. 491–509,

Malatesta, P.H. (1983), “The wealth effect of merger activity and the objective functions of merging fims”, Journal of Financial Economics, vol. 11, no. 1–4, pp. 155–181,

Mallin, C.A. (2004), Corporate Governance, Oxford University Press, Oxford, UK, pp. 161–179.

Malmendier, U., and Tate, G. (2008), “Who makes acquisitions? CEO overconfience and the market's reaction”, Journal of Financial Economics, vol. 89, no. 1, pp. 20–43,

Maloney, M.T., McCormick, R.E., and Mitchell, M.L. (1993), “Managerial decision making and capital structure”, Journal of Business, vol. 66, no. 2, pp. 189–217,

Masulis, R.W., Wang, C., and Xie, F. (2007), “Corporate governance and acquirer returns”, Journal of Finance, vol. 62, no. 4, pp. 1851–1889,

Miletkov, M., Moskalev, S., and Wintoki, M.B. (2015), “Corporate boards and acquirer returns: international evidence”, Managerial Finance, vol. 41, no. 3, pp. 244–266,

Moeller, S.B., Schlingemann, F.P., and Stulz, R.M. (2004), “Firm size and the gains from acquisitions”, Journal of Financial Economics, vol. 73, no. 2, pp. 201–228,

Morck, R., Shleifer, A., and Vishny, R.W., (1990), “Do managerial objectives drive bad acquisitions?”, Journal of Finance, vol. 45, no. 1, pp. 31–48,

Offier, M.S. (2007), “The price of corporate liquidity: Acquisition discounts for unlisted targets”, Journal of Financial Economics, vol. 83, no. 3, pp. 571–598,

Rechner, P.L., and Dalton, D.R. (1991), “CEO duality and organizational performance: A longitudinal analysis”, Strategic Management Journal, vol. 12, no. 2, pp. 155–160,

Roll, R. (1986), “The hubris hypothesis of corporate takeovers”, Journal of Business, vol. 59, no. 2, pp. 197–216,

Sabatier, M. (2015), “A women’s boom in the boardroom: effects on performance?”, Applied Economics, vol. 47, no. 26, pp. 2717–2727,

Servaes, H. (1991), “Tobin’s q and the gains from takeovers”, Journal of Finance, vol. 46, no. 1, pp. 409–419,

Shinn, E.W. (1999), “Returns to acquiring fims: The role of managerial ownership, managerial wealth, and outside owners”, Journal of Economics and Finance, vol. 23, no. 1, pp. 78–89,

Stein, J.C. (1988), “Takeover threats and managerial myopia”, Journal of Political Economy, vol. 96, no. 1, pp. 61–80,

Vancil, R.F. (1987), Passing the Baton: Managing the Process of CEO Succession, Harvard Business School, Boston,

Walters, B.A., Kroll, M.J., and Wright, P. (2007), “CEO tenure, boards of directors, and acquisition performance”, Journal of Business Research, vol. 60, no. 4, pp. 331–338,

Yermack, D. (1996), “Higher market valuation of companies with a small board of directors”, Journal of Financial Economics, vol. 40, no. 2, pp. 185–211,

Zollo, M., and Meier, D. (2008), “What is M&A performance?”, The Academy of Management Perspectives, vol. 22, no. 3, pp. 55–77,

Data publikacji: 2019-03-02 12:19:58
Data złożenia artykułu: 2018-11-18 21:05:20


Total abstract view - 1927
Downloads (from 2020-06-17) - PDF - 0



  • There are currently no refbacks.

Copyright (c) 2019 Aleksandra Anna Chadam

Creative Commons License
This work is licensed under a Creative Commons Attribution 4.0 International License.