Abstract
This paper, taking the directors of listed companies as point of penetration, studies the effects of interlocking directorates on the company’s merger decisions. With a focus on interlocking directorates’ influence on the selection of M & A targets, a Probit regression test was conducted by pairing potential M & A targets to real acquisition sample according to the industry of the real sample. The innovation of this paper lies in the study of whether there is a significant difference in the effect of interlocking directorates through differentiating various M & A modes, including horizontal mergers, vertical mergers and mixed mergers. The empirical analysis concludes that when there are interlocking directorates in merger company and potential target company, it is more likely for the potential target to be the object company. What’s more, by comparison, when the acquiring company and the target company are from different industries, there is greater impact of interlocking directorates, and the effects are stronger in vertical mergers than in mixed mergers and horizontal mergers.
Highlights
Corporate governance is the core of listed companies to establish a modern enterprise system, and the Board, as an independent and effective senior management team in the company, is the key to corporate governance
Through a literature study of foreign and domestic publications on interlocking directorates, we found that most researches have focused on the impact of interlocking directorates on decisionmaking and performance of M & A of a single company
Empirical result of estimated interlocking directorates’ variables coefficients was 0.704 in the Probit test of the full sample. It was 1% level significantly, indicating that interlocking directorates have a positive impact on M & A
Summary
Corporate governance is the core of listed companies to establish a modern enterprise system, and the Board, as an independent and effective senior management team in the company, is the key to corporate governance. Studies have shown that interlocking directorates bridge the two companies in reducing the information asymmetry, reducing transaction costs and changing the mechanism of information communication, affecting the decision-making of mergers and the performance of acquisitions [3]. Through a literature study of foreign and domestic publications on interlocking directorates, we found that most researches have focused on the impact of interlocking directorates on decisionmaking and performance of M & A of a single company. Since there are few studies associating the acquisition company and the acquired company, this paper, taking China’s listed companies as samples, attempts to build the association between the acquisition company and the acquired company, studying the influence of the interlocking directorates have on the behavior of company in choosing the object of merger
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