Governance Mandates, Outside Directors, and Acquirer Performance

59 Pages Posted: 10 Nov 2016 Last revised: 6 Apr 2017

See all articles by Jay Dahya

Jay Dahya

Zicklin School of Business

Andrey Golubov

University of Toronto - Rotman School of Management

Dimitris Petmezas

Durham University Business School

Nickolaos G. Travlos

University of Surrey; ALBA Graduate Business School

Date Written: November 1, 2016

Abstract

We use hand-collected board data around the issuance of two distinct government-led board structure mandates in the U.K. to establish the effect of outside directors on acquirer performance. Increases in outside director representation are associated with better acquirer returns in deals involving listed targets, but not when the target is private. These results are consistent with greater outside director reputational exposure when publicity is high. While we do not advocate mandated board structures, our evidence suggests that the particular diktats we examine were associated with improved acquirer performance in public firm takeovers. We present corroborating evidence from the U.S. around a similar reform period.

Keywords: Board Structures, Mergers, Corporate Governance

JEL Classification: G14, G34, G38

Suggested Citation

Dahya, Jay and Golubov, Andrey and Petmezas, Dimitris and Travlos, Nickolaos G., Governance Mandates, Outside Directors, and Acquirer Performance (November 1, 2016). Journal of Corporate Finance, Forthcoming, Rotman School of Management Working Paper No. 2867119, Available at SSRN: https://ssrn.com/abstract=2867119

Jay Dahya

Zicklin School of Business ( email )

17 Lexington Avenue
New York, NY 10010
United States

Andrey Golubov (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Dimitris Petmezas

Durham University Business School ( email )

Mill Hill Lane
Durham, DH1 3LB
United Kingdom

Nickolaos G. Travlos

University of Surrey ( email )

Guildford
Guildford, Surrey GU2 5XH
United Kingdom

ALBA Graduate Business School ( email )

Athinas Ave. & 2A Areos Str.
Vouliagmeni 166 71, Athens
Greece

HOME PAGE: http://www.alba.edu.gr

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