Director networks and takeovers |
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Institution: | 1. Department of Finance and Center, Tilburg University, P.O. Box 90153, 5000 LE Tilburg, The Netherlands;2. European Corporate Governance Institute (ECGI), UK;3. Cardiff Business School, Aberconway Building, Colum Drive, Cardiff CF10 3EU, UK;1. Department of Finance and Center, Tilburg University, P.O. Box 90153, 5000 LE Tilburg, The Netherlands;2. European Corporate Governance Institute (ECGI), UK;3. Cardiff Business School, Aberconway Building, Colum Drive, Cardiff CF10 3EU, UK;1. Bauer College of Business, University of Houston, Houston, TX 77204, United States;2. School of Business and Economics, Universidad de los Andes, Santiago, Chile;1. Cardiff Business School, Cardiff University, UK;2. European Corporate Governance Institute (ECGI), Belgium;3. CentER, Tilburg University, The Netherlands;1. Università Cattolica del Sacro Cuore, Milan, Italy;2. Department of Finance, College of Business Administration, BSN 3403, University of South Florida, Tampa, FL 33620, USA;3. Surrey Business School, University of Surrey, Surrey, United Kingdom;1. Temple University, United States;2. City University of Hong Kong, Hong Kong;3. Yonsei University, Republic of Korea;1. Olayan School of Business, American University of Beirut, Beirut, Lebanon;2. Stuart School of Business, Illinois Institute of Technology, 10 West 35th Street, 18th floor, Chicago, IL 60616, USA;3. Fordham University, Bank of Finland and University of Sydney, New York, NY 10023, USA |
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Abstract: | We study the impact of corporate networks on the takeover process. We find that better connected companies are more active bidders. When a bidder and a target have one or more directors in common, the probability that the takeover transaction will be successfully completed augments, and the duration of the negotiations is shorter. Connected targets more frequently accept offers that involve equity. Directors of the target firm (who are not interlocked) have a better chance to be invited to the board of the combined firm in connected M&As. While connections have a clear impact on the takeover strategy and process, we do not find evidence that the market acknowledges connections between bidders and targets as the announcement returns are not statistically different from those bidders and targets which are ex ante not connected. |
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