This paper examines how media-linked independent directors affect firms’ mergers and acquisitions (M&A) activity.
Using 18,966 firm-year observations covering 1,966 unique US firms and 2,603 deals from 2000 to 2017, we employ OLS regressions to examine the relationship between M&A activity – measured as the natural logarithm of the number and value of completed deals in t+1 – and an indicator for the presence of media-linked independent directors in year t. The models control for firm characteristics, as well as industry and year fixed effects. Robustness tests include propensity score matching, instrumental variable estimation, and the inclusion of additional board-level controls.
Firms with media-linked independent directors complete fewer and smaller M&A deals. Cross-sectional analyses show that the negative relationship is concentrated among firms with low R&D intensity, larger firms, and firms with CEO duality – settings characterized by greater agency problems and weaker internal governance. These firms are also less likely to engage in conglomerate deals motivated by empire building. The results are consistent with a monitoring role for media-linked independent directors.
This study provides novel evidence that interlocking directorships with media firms serve as an external governance mechanism influencing M&A activity. While prior research (Hossain and Javakhadze, 2020) finds that managerial social ties with media increase acquisitiveness, we show that independent directors’ structural social capital via media interlocks strengthens monitoring, leading to fewer and smaller deals. The study highlights how the media’s governance role depends on the form of connection between firms and the media industry.
