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Director Histories and the Pattern of Acquisitions

Published online by Cambridge University Press:  26 October 2015

Peter L. Rousseau  and
Caleb Stroup
Peter L. Rousseau*
Affiliation:
[email protected], Vanderbilt University, Department of Economics, Nashville, TN 37235
Caleb Stroup
Affiliation:
[email protected], Davidson College, Department of Economics, Davidson, NC 28035.
*
*Corresponding author: [email protected]
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Abstract

We trace directors through time and across firms to study whether acquirers’ access to nonpublic information about potential targets via their directors’ past board service histories affects the market for corporate control. In a sample of publicly traded U.S. firms, we find acquirers about 4.5 times more likely to buy firms where their directors once served. Effects are stronger when the acquirer has better corporate governance, the interlocked director has a larger ownership stake at the acquirer, or the director played an important role during past service. The findings are robust to endogeneity of board composition and controls for contemporaneous interfirm interlocks.

Type
Research Articles
Information
Journal of Financial and Quantitative Analysis , Volume 50 , Issue 4 , August 2015 , pp. 671 - 698
Copyright
Copyright © Michael G. Foster School of Business, University of Washington 2015 

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