Board Composition, Board Effectiveness, and the Observed Form of Takeover Bids

We show that bidding firms consider target board characteristicswhen deciding takeover offer types and initial offer premiums.We study a sample of 436 proposed negotiated mergers and bypassoffers. Firms with individuals holding the titles of both chiefexecutive officer (CEO) and board chair are more likely to receivebypass offers. These offers are more likely to be successfuland generate higher target shareholder gains over the takeoveroffer period. When the target's board is independent, the targetis less likely to receive a high premium and the offer is lesslikely to succeed.