Co-opted board and market reactions to acquisition announcements: the role of internal and external monitoring
| Panel A: entrenchment index | ||||||
|---|---|---|---|---|---|---|
| High eindex | Low eindex | High eindex | Low eindex | High eindex | Low eindex | |
| (1) | (2) | (3) | (4) | (5) | (6) | |
| CAR | CAR | CAR | CAR | CAR | CAR | |
| PCO_OPT | −0.0106* | −0.0019 | – | – | – | – |
| (−1.90) | (−0.54) | |||||
| NCO_OPT | – | – | −0.0010* | −0.0003 | – | – |
| (−1.91) | (−0.83) | |||||
| RCO_OPT | – | – | – | – | −0.0102* | −0.0016 |
| (−1.83) | (−0.47) | |||||
| CONSTANT | 0.0234 | 0.0169 | 0.0130 | 0.0146 | 0.0165 | 0.0159 |
| (0.92) | (1.13) | (0.49) | (0.96) | (0.63) | (1.06) | |
| Controls | Yes | Yes | Yes | Yes | Yes | Yes |
| Year fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
| Industry fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
| R2 | 0.1138 | 0.0612 | 0.1135 | 0.0613 | 0.1136 | 0.0612 |
| N | 954 | 2,763 | 954 | 2,763 | 954 | 2,763 |
| Panel A: entrenchment index | ||||||
|---|---|---|---|---|---|---|
| High eindex | Low eindex | High eindex | Low eindex | High eindex | Low eindex | |
| (1) | (2) | (3) | (4) | (5) | (6) | |
| CAR | CAR | CAR | CAR | CAR | CAR | |
| PCO_OPT | −0.0106* | −0.0019 | – | – | – | – |
| (−1.90) | (−0.54) | |||||
| NCO_OPT | – | – | −0.0010* | −0.0003 | – | – |
| (−1.91) | (−0.83) | |||||
| RCO_OPT | – | – | – | – | −0.0102* | −0.0016 |
| (−1.83) | (−0.47) | |||||
| CONSTANT | 0.0234 | 0.0169 | 0.0130 | 0.0146 | 0.0165 | 0.0159 |
| (0.92) | (1.13) | (0.49) | (0.96) | (0.63) | (1.06) | |
| Controls | Yes | Yes | Yes | Yes | Yes | Yes |
| Year fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
| Industry fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
| 0.1138 | 0.0612 | 0.1135 | 0.0613 | 0.1136 | 0.0612 | |
| 954 | 2,763 | 954 | 2,763 | 954 | 2,763 | |
| Panel B: Institutional ownership | ||||||
|---|---|---|---|---|---|---|
| High insto | Low insto | High insto | Low insto | High insto | Low insto | |
| (1) | (2) | (3) | (4) | (5) | (6) | |
| CAR | CAR | CAR | CAR | CAR | CAR | |
| PCO_OPT | −0.0028 | −0.0107*** | – | – | – | – |
| (−0.97) | (−3.52) | |||||
| NCO_OPT | – | – | −0.0003 | −0.0010*** | – | – |
| (−1.11) | (−3.54) | |||||
| RCO_OPT | – | – | – | – | −0.0023 | −0.0099*** |
| (−0.80) | (−3.27) | |||||
| CONSTANT | 0.0295 | 0.0149 | 0.0268 | 0.0063 | 0.0281 | 0.0084 |
| (0.78) | (1.18) | (0.71) | (0.49) | (0.74) | (0.66) | |
| Controls | Yes | Yes | Yes | Yes | Yes | Yes |
| Year fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
| Industry fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
| R2 | 0.0525 | 0.0426 | 0.0525 | 0.0422 | 0.0524 | 0.0423 |
| N | 4,284 | 4,655 | 4,284 | 4,655 | 4,284 | 4,655 |
| Panel B: Institutional ownership | ||||||
|---|---|---|---|---|---|---|
| High insto | Low insto | High insto | Low insto | High insto | Low insto | |
| (1) | (2) | (3) | (4) | (5) | (6) | |
| CAR | CAR | CAR | CAR | CAR | CAR | |
| PCO_OPT | −0.0028 | −0.0107*** | – | – | – | – |
| (−0.97) | (−3.52) | |||||
| NCO_OPT | – | – | −0.0003 | −0.0010*** | – | – |
| (−1.11) | (−3.54) | |||||
| RCO_OPT | – | – | – | – | −0.0023 | −0.0099*** |
| (−0.80) | (−3.27) | |||||
| CONSTANT | 0.0295 | 0.0149 | 0.0268 | 0.0063 | 0.0281 | 0.0084 |
| (0.78) | (1.18) | (0.71) | (0.49) | (0.74) | (0.66) | |
| Controls | Yes | Yes | Yes | Yes | Yes | Yes |
| Year fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
| Industry fixed effects | Yes | Yes | Yes | Yes | Yes | Yes |
| 0.0525 | 0.0426 | 0.0525 | 0.0422 | 0.0524 | 0.0423 | |
| 4,284 | 4,655 | 4,284 | 4,655 | 4,284 | 4,655 | |
Note(s): This table presents the regression results of the effect of co-opted board on acquisition performance with other control variables for high versus low entrenchment index in Panel A and high versus low institutional shareholdings in Panel B. Robust two-tailed t-statistics clustered by the firm are presented in parentheses. The superscripts ***, ** and * correspond to statistical significance at the 1%, 5% and 10% levels, respectively. We present the variable definitions in the Appendix
Source(s): Authors’ own work
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