Board Composition and Corrective Action: Evidence from Corporate Responses to Bad Acquisition Bids
45 Pages Posted: 18 Jul 2001
There are 2 versions of this paper
Board Composition and Corrective Action: Evidence from Corporate Responses to Bad Acquisition Bids
Board Composition and Corrective Action: Evidence from Corporate Responses to Bad Acquisition Bids
Date Written: November 2005
Abstract
This study investigates the role of corporate boards following large declines in share value surrounding acquisition announcements. The results indicate that firms with independent boards are less likely to complete these value-decreasing bids, suggesting that boards influence corporate responses to information in stock prices. Board independence is also associated with unusually high frequencies of asset restructuring for bids that are completed, suggesting that independent boards promote restructuring in mergers the market believes are difficult to integrate. These results complement existing evidence on the board's ex-ante role in averting bad outcomes by showing that independent boards intervene following value-decreasing events.
Keywords: Corporate restructuring, Takeovers, Acquisitions, Acquisition bids, Governance and Performance, Internal governance, Poor performance, Bad bids, Asset restructuring, Agency Problems, Board independence
JEL Classification: G32, G34
Suggested Citation: Suggested Citation
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