Institutional context as a moderator of the relationship between board structure and acquirer returns

The objective of this paper is to contribute to the understanding of the supervisory role of the board of directors in the context of mergers and acquisitions (M&As). We focus our study on the European case, for which there is no previous exhaustive evidence on this topic. Using information on 985 mergers and acquisitions carried out over the period 2003–2016 by companies in the major European countries, we analyze the influence of supervisory capacity of the board (small size, higher proportion of outsiders and separated Chairperson-CEO positions) on acquirer returns, differentiating between Anglo-Saxon and continental European contexts. Our results confirm that the effectiveness of corporate governance practices depends strongly on their fit with the broader institutional context. Specifically, we find that a smaller size of the board of directors and the separation of the positions of Chairperson and CEO lead to higher acquirer returns in European Anglo-Saxon countries. By contrast, we do not find evidence that any proxy of supervisory capacity of the board significantly improves acquirer returns in the rest of countries.