The influence of powerful non-executive Chairs in Mergers and acquisitions

Abstract This paper examines the influence of the non-executive Chair of bidding firms on various takeover outcomes. We study this in the Australian context due to its unique institutional setting where only 5% of Chair and CEO roles are combined, compared to 60% in the U.S. Based on a sample of 316 acquisitions by ASX listed firms between 2004 and 2014, we find that firms with a powerful Chair pay lower bid premiums and are also less likely to revise the initial offer price. Furthermore, Chair power is found to have a positive association with the bidding firm’s market reaction to the takeover announcement. Our evidence is robust with respect to alternative tests and variable specifications.