An Analysis of Board Composition and Acquisition Premiums

Abstract

This study uses multiple linear regression analysis to explore the relationship between the board composition of acquired companies and their corresponding acquisition premiums. With a sample of 892 publicly traded target companies, I investigate board independence, involvement on other boards, board size, time spent on the board, gender diversity, and director equity ownership. My results imply that board independence and director equity ownership have a positive relationship with acquisition premiums. The results on the remaining traits are inconclusive. This analysis concludes that with these characteristics, boards are more inclined to represent the interest of shareholders in the event of an acquisition. These findings support the argument for corporate boards as a mechanism to reduce agency costs between management and shareholders.