Research On The Effects Of Executive Interlocks On Mergers And Acquisitions Of Target Selection And Premium

Mergers and Acquisitions(M&A)are an important way for modern enterprise expansion.The original intention of M&A activities is to obtain synergies effect through mergers and acquisitions for the acquirer.In the past few decades,a large amount of studies has been carried out on the value of M&A in the international academic circles,but there is no consistent.Some researchers believe that M&A activities can create value,while some researchers believe that M&A activities have not created value for acquirer.Whether M&A activity can create value is an important issue in the field of M&A research.The existing research mainly studies this issue from the perspective of M&A companies,the perspective of the target company and the relationship between the both parties.From the perspective of the relationship between the both parties,there are still relatively few studies.The only ones are mainly concentrated on the industrial relations,regional relations,and cultural backgrounds between the both parties.In recent years,some scholars have studied this issue from the aspects of political connection and board interlocks,but few researchers have considered it from the perspective of the executive interlocks relations between both parties of M&A.The problem of information asymmetry that is widespread in the M&A market is an important reason for destroying the value of M&A.The executive interlocks relations between the both parties can serve as a channel for information transmission,which may help to alleviate the information asymmetry between the both parties,which in turn affects the creation of the value of M&A.This paper combs and analyzes the existing literatures on M&A target selection and M&A premium influencing factors.From the perspective of information asymmetry theory and resource dependence theory,this paper analyzes the relationship between the executive interlocks and target selection or M&A premium.Furthermore,two hypotheses are proposed in this paper:(1)When other conditions are the same,the potential target company that has executive interlocks with the acquirer is more likely to become the target company.(2)When the other conditions are the same,the acquirer that has executive interlocks with the target company pays a lower M&A premium.This paper takes 103 domestic M&A events from 2012 to 2017,in which both acquirer and target are A-share listed companies as the research samples.By constructing multiple linear regression models,the impact of the executive interlocks relations between both parties on the M&A premium is tested.The influence of the executive interlocks relations between both parties on the selection of M&A targets was examined by constructing a paired sample.The method of constructing the paired sample is as follows: takes 103 domestic M&A events from 2012 to 2017,in which both acquirer and target are A-share listed,as the experimental group,which is the same as the target company's industry and scales are paired with the acquirer as the control groups.the experimental and control groups are placed as a sample to examine the impact of the executive interlocks relations between both parties on the target selection by constructing a Probit regression model.The regression analysis results are as follows:(1)When there are executive interlocks relations between the acquirer and the potential target company,the potential target company is more likely to become the target company.(2)When there are executive interlocks relations between the both parties,the acquirer pays a lower M&A premium.