Is Non-Executive Directors' Pay or Industry Expertise Related to Takeover Premiums, Abnormal Returns and Offer Price Revisions?

Posted: 25 Aug 2017

See all articles by Martin Bugeja

Martin Bugeja

University of Technology, Sydney; Financial Research Network (FIRN)

Zoltan Matolcsy

University of Technology, Sydney; Financial Research Network (FIRN)

Helen Spiropoulos

University of Technology Sydney (UTS)

Date Written: June 27, 2017

Abstract

We examine the association between various takeover outcomes and bidding firm non-executive directors’ (NEDs) compensation and expertise in the target firm industry. In our sample of 272 acquisitions by ASX listed firms between 2004 and 2011, we find that NEDs’ relative compensation and industry expertise have a negative association with the bid premium. We also find that NEDs’ relative compensation is positively associated with the bidding firm’s market reaction to the takeover announcement, and NEDs’ industry expertise is associated with a lower likelihood of an increase in the offer price, particularly for M&As viewed negatively by the market. These results are consistent with higher NEDs’ relative compensation and industry expertise leading to more effective board monitoring and advising.

Keywords: Bid Premium, Compensation, Cumulative Abnormal Return, Industry Expertise, Market Reaction, M&as, Non-Executive Directors

JEL Classification: G34

Suggested Citation

Bugeja, Martin and Matolcsy, Zoltan and Spiropoulos, Helen, Is Non-Executive Directors' Pay or Industry Expertise Related to Takeover Premiums, Abnormal Returns and Offer Price Revisions? (June 27, 2017). Australian Journal of Management, Vol. 42, No. 3, 2017, Available at SSRN: https://ssrn.com/abstract=3024503

Martin Bugeja (Contact Author)

University of Technology, Sydney ( email )

Australia
61 2 9514 3743 (Phone)
61 2 9514 3669 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Zoltan Matolcsy

University of Technology, Sydney ( email )

School of Accounting PO Box 123
Sydney 2007, New South Wales
Australia
+61 2 9514-3564 (Phone)
+61 2 9514-3669 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Helen Spiropoulos

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia
+61295143286 (Phone)
+61295143669 (Fax)

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