When Do Boards of Directors Contribute to Shareholder Value in Firms Targeted for Acquisition? A Group Information-Processing Perspective
Stevo Pavićević, Jerayr (John) Haleblian, Thomas Keil
Organization Science · 2023 · Volume 34 · Issue 5
Abstract
We draw on group information-processing theory to investigate how target boards of directors may contribute to target value capture during the private negotiations phase in acquisitions. We view target boards as information-processing groups and private negotiations as information-processing tasks. We argue that target board meeting frequency is associated with increased processing—gathering, sharing, and analyzing—of acquisition-related information, which improves target bargaining and, ultimately, target value capture. We further posit that this value-enhancing effect of target board meeting frequency is more pronounced when target board composition improves the ability of target boards to process acquisition-related information. Finally, we expect that meeting frequency is more consequential for target bargaining and value capture when acquisition complexity imposes high information-processing demands on the target boards during private negotiations. Empirical evidence from a sample of acquisitions of publicly listed firms in the United States offers support for our group information-processing perspective on board contribution to shareholder value in firms targeted for acquisition. Funding: This work was supported by the Strategy Research Foundation [Dissertation Grant SRF-2015DP-0016]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/orsc.2022.1643 .
Keywords
acquisitions, board of directors, board meetings, group information processing, negotiations, complexity
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