Definitions of variables used in main models
| Variable | Definition |
|---|---|
| Dependent and independent variables | |
| PCO_OPT | Number of co-opted directors divided by number of directors on the board. A director is considered to be a co-opted director if he/she is appointed after the incumbent CEO assumes office |
| NCO_OPT | The distance between the number of co-opted directors on the board and the number of directors on the board |
| RCO_OPT | The residual from a regression of PCO_OPT on CEO tenure |
| CAR | Following Chang (1998), Moeller et al. (2004). and Masulis et al. (2007), we calculate the three-day cumulative abnormal return earned by the acquirer during the M&A announcement date, using the market model over a period of 200 days (−210, −11) preceding the announcement date. We exclude the 10-day window immediately prior to the acquisition announcement period from the estimation period because it is common in acquisition events that the information is leaked to the capital market well before the actual announcement |
| Firm characteristics | |
| SIZE | The natural logarithm of acquiring firm’s total assets |
| LEV | Acquiring firm’s total debt divided by total assets |
| CASH | Firm’s total cash and equivalent divided by total assets |
| TOBINQ | Acquiring firm’s market capitalisation plus total liabilities divided by total assets |
| ROA | Acquiring firm’s earnings before interest, depreciation and amortisation, divided by total book assets of the acquiring firms |
| Corporate governance | |
| CEO_DUALITY | Indicator variable that takes the value of one if both CEO and chair positions are held by the same person, and zero otherwise |
| LNCEO_TENURE | The natural logarithm of CEO tenure |
| LNBOARD_SIZE | The natural logarithm of total number of directors of the firm |
| BOARD_INDEP | The percentage of independent directors on the board |
| LNANALYSTS | The natural logarithm of firm’s total number of analysts following |
| Deal characteristics | |
| RELATIVESIZE | Transaction value reported by SDC divided by the market value of the acquirer one month prior to the acquisition announcement |
| ALLCASH | A dummy variable that equals to one if the deal is fully financed by cash, and zero otherwise |
| ALLSTOCK | A dummy variable that equals to one if the deal is fully financed by stock, and zero otherwise |
| RELATEDID | A dummy variable that equals to one if bidder and target are from the same industries, zero otherwise |
| TENDEROFFER | A dummy variable that takes the value of one if the deal is tender, zero otherwise |
| COMPETINGBID | A dummy variable that takes the value of one if there are at least two acquirers making an offer to a target, zero otherwise |
| Other variables | |
| Entrenchment index | |
| Institutional ownership | |
| YOUNGCEO | A dummy variable that takes the value of one if the CEO is younger than 65 years old, zero otherwise |
| CEO VEGA | The natural logarithm of the CEO’s vega |
| CEO TENURE | The natural logarithm of the CEO’s tenure |
| CEO GENDER | A dummy variable equal to 1 if the CEO is female, and zero otherwise |
| BIDPREM | For public targets: The difference between the deal value and the market capitalisation one month before the deal announcement |
| For private targets: The average bid premium paid to public targets in a given industry and year | |
| PARACQ | A dummy variable equals to one if the bidder acquires less than 100%, and zero otherwise |
| LOGDAYS | The natural logarithm of the number of days between bid announcement and deal execution |
| COMPLETED | A dummy variable equals to one if the deal is completed, and zero otherwise |
| Variable | Definition |
|---|---|
| PCO_OPT | Number of co-opted directors divided by number of directors on the board. A director is considered to be a co-opted director if he/she is appointed after the incumbent CEO assumes office |
| NCO_OPT | The distance between the number of co-opted directors on the board and the number of directors on the board |
| RCO_OPT | The residual from a regression of PCO_OPT on CEO tenure |
| CAR | Following |
| SIZE | The natural logarithm of acquiring firm’s total assets |
| LEV | Acquiring firm’s total debt divided by total assets |
| CASH | Firm’s total cash and equivalent divided by total assets |
| TOBINQ | Acquiring firm’s market capitalisation plus total liabilities divided by total assets |
| ROA | Acquiring firm’s earnings before interest, depreciation and amortisation, divided by total book assets of the acquiring firms |
| CEO_DUALITY | Indicator variable that takes the value of one if both CEO and chair positions are held by the same person, and zero otherwise |
| LNCEO_TENURE | The natural logarithm of CEO tenure |
| LNBOARD_SIZE | The natural logarithm of total number of directors of the firm |
| BOARD_INDEP | The percentage of independent directors on the board |
| LNANALYSTS | The natural logarithm of firm’s total number of analysts following |
| RELATIVESIZE | Transaction value reported by SDC divided by the market value of the acquirer one month prior to the acquisition announcement |
| ALLCASH | A dummy variable that equals to one if the deal is fully financed by cash, and zero otherwise |
| ALLSTOCK | A dummy variable that equals to one if the deal is fully financed by stock, and zero otherwise |
| RELATEDID | A dummy variable that equals to one if bidder and target are from the same industries, zero otherwise |
| TENDEROFFER | A dummy variable that takes the value of one if the deal is tender, zero otherwise |
| COMPETINGBID | A dummy variable that takes the value of one if there are at least two acquirers making an offer to a target, zero otherwise |
| YOUNGCEO | A dummy variable that takes the value of one if the CEO is younger than 65 years old, zero otherwise |
| CEO VEGA | The natural logarithm of the CEO’s vega |
| CEO TENURE | The natural logarithm of the CEO’s tenure |
| CEO GENDER | A dummy variable equal to 1 if the CEO is female, and zero otherwise |
| BIDPREM | For public targets: The difference between the deal value and the market capitalisation one month before the deal announcement |
| For private targets: The average bid premium paid to public targets in a given industry and year | |
| PARACQ | A dummy variable equals to one if the bidder acquires less than 100%, and zero otherwise |
| LOGDAYS | The natural logarithm of the number of days between bid announcement and deal execution |
| COMPLETED | A dummy variable equals to one if the deal is completed, and zero otherwise |
Source(s): Authors’ own work
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