The role of directors with related supply chain industry experience in corporate acquisition decisions

Abstract

Abstract We examine the extent to which directors with supply chain experience (DSCs) on corporate boards create informational advantages that improve strategies and outcomes related to mergers and acquisitions (M&A). Our results suggest that DSCs play a dual role by motivating value-enhancing acquisitions while simultaneously deterring value-destroying ones. The nature and extent of these effects depend on such factors as the size of the acquiring firm and the level of uncertainty in its operating environment. Furthermore, we find that DSCs are positively associated with abnormal announcement returns. Acquirers with at least one DSC outperform their counterparts without DSCs by 3.1% during a three-day window around the announcement. Our results hold after we address endogeneity concerns using multiple methods. Finally, we show that acquirer board representation by DSCs is positively related to post-merger operating performance and negatively related to the premium paid for the target.