Abstract
The extant academic evidence is, at best, mixed regarding whether bidders gain from their acquisitions. It suggests that many, arguably most, acquirers fail to add to shareholder value through their bids. This paper proposes and explains why companies with boards of directors, which are relatively independent of management, should make better acquisition bids. This prediction is tested using financial event study methodology. Evidence that Cumulative Abnormal Return (CAR) on acquisition is significantly positive for companies with independent boards is reported. Furthermore, these companies have significantly higher abnormal returns (ARs) than those with non-independent boards.
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