Board Composition and Corrective Action: Evidence from Corporate Responses to Bad Acquisition Bids

45 Pages Posted: 18 Jul 2001

Multiple version iconThere are 2 versions of this paper

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

Paul, Donna L., Board Composition and Corrective Action: Evidence from Corporate Responses to Bad Acquisition Bids (November 2005). Available at SSRN: https://ssrn.com/abstract=274574

Donna L. Paul (Contact Author)

Washington State University ( email )

Carson College of Business
WA
United States

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