The impact of board independency, CEO duality and CEO fixed compensation on M&A performance

Purpose This study aims to examine whether particular corporate governance mechanisms influence the performance of mergers and acquisitions. Design/methodology/approach Regression analyses investigating 1,596 recent acquisitions in the US market completed over the five-year period from 2009 to 2013 are performed. Findings The results show that board independency, CEO duality and level of CEO fixed compensation have an impact on the return of acquisitions. Moreover, the findings indicate that acquisitions significantly create value for bidders delivering a positive cumulative abnormal return upon announcement. Finally, also focusing on the 690 relative larger deals, there is a clear evidence of a positive influence of good corporate governance mechanisms over the quality of acquisitions completed. Originality/value To our knowledge, this is the first paper trying to identify corporate governance mechanisms related to the best acquisition decisions, by using specifically the three corporate governance variables (CEO duality, CEO fixed compensation and board independency).