Multiple directorships and acquirer returns

Seoungpil Ahn, Pornsit Jiraporn, Young Sang Kim

Research output: Contribution to journalArticle

83 Citations (Scopus)

Abstract

This paper examines the impact of multiple directorships on stockholder wealth around the announcements of mergers and acquisitions. Grounded in agency theory, we argue that multiple directorships affect the quality of managerial oversight and thus influence agency conflicts in acquisition decisions. We show that acquiring firms where directors hold more outside board seats experience more negative abnormal returns. This adverse effect, nonetheless, does not extend across the entire range of multiple directorships. Rather, the detrimental impact is significant only when the number of outside board seats surpasses a certain threshold. We interpret this result as suggesting that directors serving on multiple boards allow value-destroying acquisitions when they become too busy beyond a certain point, and the effect of directors' busyness on acquisition performance appears to be nonlinear. We employ several alternative definitions of directors' busyness and obtain consistent results.

Original languageEnglish (US)
Pages (from-to)2011-2026
Number of pages16
JournalJournal of Banking and Finance
Volume34
Issue number9
DOIs
StatePublished - Sep 1 2010

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Multiple directorships
Seat
Mergers and acquisitions
Oversight
Agency conflict
Agency theory
Announcement
Stockholders
Wealth
Abnormal returns

All Science Journal Classification (ASJC) codes

  • Finance
  • Economics and Econometrics

Cite this

Ahn, Seoungpil ; Jiraporn, Pornsit ; Kim, Young Sang. / Multiple directorships and acquirer returns. In: Journal of Banking and Finance. 2010 ; Vol. 34, No. 9. pp. 2011-2026.
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Multiple directorships and acquirer returns. / Ahn, Seoungpil; Jiraporn, Pornsit; Kim, Young Sang.

In: Journal of Banking and Finance, Vol. 34, No. 9, 01.09.2010, p. 2011-2026.

Research output: Contribution to journalArticle

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