Access the full text.
Sign up today, get DeepDyve free for 14 days.
Ohta Ohta, Yee Yee (2008)
The fairness opinion puzzle: Board incentives, information asymmetry, and bidding strategyJournal of Legal Studies, 37
Gompers Gompers, Ishii Ishii, Metrick Metrick (2003)
Corporate governance and equity pricesQuarterly Journal of Economics, 118
Kisgen Kisgen, Qian Qian, Song Song (2009)
Are fairness opinions fair? The case of mergers and acquisitionsJournal of Financial Economics, 91
Fich Fich, Shivdasani Shivdasani (2006)
Are busy board effective monitors?Journal of Business, 61
Cotter Cotter, Shivdasani Shivdasani, Zenner Zenner (1997)
Do independent directors enhance target shareholder wealth during tender offers?Journal of Financial Economics, 43
Kroll Kroll, Walters Walters, Wright Wright (2008)
Board vigilance, director experience, and corporate outcomesStrategic Management Journal, 29
Rutherford Rutherford, Buchholtz Buchholtz (2007)
Investigating the relationship between board characteristics and board informationCorporate Governance: An International Review, 15
Coles Coles, Daniel Daniel, Naveen Naveen (2008)
Boards: Does one size fit all?Journal of Financial Economics, 87
Andrade Andrade, Mitchell Mitchell, Stafford Stafford (2001)
New evidence and perspectives on mergersJournal of Economic Perspectives, 15
Fama Fama, Jensen Jensen (1983)
Separation of ownership and controlJournal of Law and Economics, 26
John John, Senbet Senbet (1998)
Corporate governance and board effectivenessJournal of Banking and Finance, 22
Mishra Mishra, Nielson Nielson (1999)
The association between bank performance, board independence, and CEO pay‐performance sensitivityManagerial Finance, 25
Jensen Jensen (1993)
The modern industrial revolution, exit, and the failure of internal control systemsJournal of Finance, 48
McDonald McDonald, Westphall Westphall, Graebner Graebner (2008)
What do they know? The effects of outside direction acquisition experience on firm acquisition performanceStrategic Management Journal, 29
Vafeas Vafeas (2003)
Length of board tenure and outside directors independenceJournal of Business Finance and Accounting, 30
Hermalin Hermalin, Weisbach Weisbach (1988)
The determinants of board compositionRAND Journal of Economics, 19
Anderson Anderson, Mansi Mansi, Reeb Reeb (2004)
Board characteristics, accounting reporting integrity, and the cost of debtJournal of Accounting and Economics, 37
Carpenter Carpenter, Westphal Westphal (2001)
The strategic context of external network ties: Examining the impact of director appointments on board involvement in strategic decision makingAcademy of Management Journal, 4
Ferris Ferris, Jagannathan Jagannathan, Pritchard Pritchard (2003)
Too busy to mind the business? Monitoring by directors with multiple board appointmentsJournal of Finance, 58
Raheja Raheja (2005)
Determinants of board size and composition: A theory of corporate boardsJournal of Financial and Quantitative Analysis, 40
Kaymak Kaymak, Bektas Bektas (2008)
East meets West? Board characteristics in an emerging market: Evidence from Turkish banksCorporate Governance: An International Review, 16
Goodstein Goodstein, Gautam Gautam, Boeker Boeker (1994)
The effects of board size and diversity on strategic changeStrategic Management Journal, 15
Johnson Johnson, Hoskisson Hoskisson, Hitt Hitt (1993)
Board of director involvement in restructuring: The effects of board vs. managerial controls and characteristicsStrategic Management Journal, 14
Capron Capron, Shen Shen (2007)
Acquisitions of private vs. public firms: Private information, target selection, and acquirer returnsStrategic Management Journal, 28
Datta Datta, Iskandar‐Datta Iskandar‐Datta, Raman Raman (2001)
Executive compensation and corporate merger decisionsJournal of Finance, 56
Katz Katz (1982)
Project communication and performance: An investigation into the effects of group longevityAdministrative Science Quarterly, 27
Moeller Moeller, Schlingemann Schlingemann, Stulz Stulz (2005)
Wealth destruction on a massive scale? A study of acquiring‐firm returns in the recent merger waveJournal of Finance, 60
Eisenberg Eisenberg, Sundgren Sundgren, Wells Wells (1998)
Larger board size and decreasing firm value in small firmsJournal of Financial Economics, 48
Harris Harris, Shimizu Shimizu (2004)
Too busy to serve? An examination of the influence of overboarded directorsJournal of Management Studies, 41
Judge Judge, Zeithaml Zeithaml (1992)
Institutional and strategic choice perspectives on board involvement in the strategic decision processAcademy of Management Journal, 35
Heckman Heckman (1979)
Sample selection bias as a specification errorEconometrica, 47
ABSTRACT Manuscript Type: Empirical Research Question/Issue: We propose and test a new perspective on why the boards of some acquiring firms purchase a fairness opinion (FO). Specifically, we examine whether the board's knowledge explains the use of an FO and the market reaction to the FO. Research Findings/Insights: We find that FOs are more likely to be purchased when the acquiring firm's board feels uncertain about the deal. Specifically, we find that boards with more outside directors are more likely to use an FO, while boards whose directors hold more outside appointments (busy boards) are less likely to seek an FO. Moreover, we find that although the market reacts negatively to the FO, board characteristics both moderate and exacerbate the reaction. When an FO is used by a busy board, the market reacts more negatively to the merger announcement. In contrast, board independence and the average service years for directors seem to moderate the market's reaction to the FO. Theoretical/Academic Implications: The results of this study are consistent with the idea that a lack of knowledge and underlying transaction uncertainty motivates the board to purchase an FO. In addition, our empirical evidence supports a sophisticated market reaction, where the market recognizes the board's knowledge when assessing the necessity of the FO. Practitioner/Policy Implications: This study provides a new perspective on why boards use FOs. A board with more outside directors may be strong on monitoring, but may lack knowledge on the deal. This essentially provides an example of a cost associated with an independent board. Further, we show that the market can differentiate the types of boards that use an FO.
Corporate Governance – Wiley
Published: Jan 1, 2010
Read and print from thousands of top scholarly journals.
Already have an account? Log in
Bookmark this article. You can see your Bookmarks on your DeepDyve Library.
To save an article, log in first, or sign up for a DeepDyve account if you don’t already have one.
Copy and paste the desired citation format or use the link below to download a file formatted for EndNote
Access the full text.
Sign up today, get DeepDyve free for 14 days.
All DeepDyve websites use cookies to improve your online experience. They were placed on your computer when you launched this website. You can change your cookie settings through your browser.