Abstract
This study examines the collective impact of expert boards and CEOs on acquisition performance, providing new insight into the CEO-board relationship. Acquiring firms with expert boards earn an additional 1.16 percentage points when their CEOs are new to the target industry compared to firms with “non-experienced” boards. However, compared to firms with expert boards alone, acquiring firms with expert boards earn an additional 3.91 percentage points when their CEOs are also experts in the target industry. Robust to endogeneity checks, our evidence supports the vigilant-advisor, resource provisioning, and “shared experience” hypotheses that take three distinct views of the CEO-board relationship. Generalist CEOs and public targets intensify the shared experience effect, whereas less powerful CEOs and private targets intensify the resource provisioning effect. Finally, experienced directors improve the quality of acquisitions by assisting acquirers to avoid large losses, identify targets with higher synergies, and negotiate better deals.
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