Director Networks and Takeovers

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Abstract

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.
Original languageEnglish
Place of PublicationTilburg
PublisherFinance
Number of pages39
Volume2013-056
Publication statusPublished - 2013

Publication series

NameCentER Discussion Paper
Volume2013-056

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Equity
Announcement returns

Keywords

  • Mergers and Acquisitions
  • Director Networks
  • Centrality
  • Connections

Cite this

Renneboog, L. D. R., & Zhao, Y. (2013). Director Networks and Takeovers. (CentER Discussion Paper; Vol. 2013-056). Tilburg: Finance.
Renneboog, L.D.R. ; Zhao, Y. / Director Networks and Takeovers. Tilburg : Finance, 2013. (CentER Discussion Paper).
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Renneboog, LDR & Zhao, Y 2013 'Director Networks and Takeovers' CentER Discussion Paper, vol. 2013-056, Finance, Tilburg.

Director Networks and Takeovers. / Renneboog, L.D.R.; Zhao, Y.

Tilburg : Finance, 2013. (CentER Discussion Paper; Vol. 2013-056).

Research output: Working paperDiscussion paperOther research output

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AU - Renneboog, L.D.R.

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N2 - 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.

AB - 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.

KW - Mergers and Acquisitions

KW - Director Networks

KW - Centrality

KW - Connections

M3 - Discussion paper

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Renneboog LDR, Zhao Y. Director Networks and Takeovers. Tilburg: Finance. 2013. (CentER Discussion Paper).