Global board reforms and corporate acquisition performance

To, Thomas, Wu, Eliza and Zhao, Diya (2024) Global board reforms and corporate acquisition performance. Journal of Corporate Finance, 87. ISSN 0929-1199

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Abstract

This paper examines the effect of board reforms on corporate acquisition performance using data from 31 countries. Using a difference-in-differences design, we find that the implementation of board reforms in the acquirer's country significantly increases acquirer returns. The increase is driven by reforms involving board independence, but not reforms involving audit committee independence nor the separation of CEO and board chair roles. Further analysis shows that the uplift in acquisition performance following improvements in board independence is strongest in acquirers with more agency problems. The ‘Board reform strengthening’ effect is concentrated in larger acquirers, with more free cash flows, executing large and public-target deals and operating in countries with ex-ante poor investor protection. The empirical evidence indicates that reforming board independence effectively alleviates agency problems between managers and shareholders and improves corporate acquisition performance.

Item Type:	Article
Additional Information:	© 2024 The Author(s)
Divisions:	Finance LSE
Subjects:	H Social Sciences > HB Economic Theory H Social Sciences > HG Finance H Social Sciences > HD Industries. Land use. Labor > HD28 Management. Industrial Management
Date Deposited:	23 Jun 2024 23:32
Last Modified:	23 Jun 2024 23:32
URI:	http://eprints.lse.ac.uk/id/eprint/123947

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