Date of Award

12-31-2013

Document Type

Campus Access Thesis

Degree Name

Master of Business Administration (MBA)

Department

Business Administration

First Advisor

Mine Ertugrul

Second Advisor

Atreya Chakraborty

Third Advisor

Atreya Chakraborty

Abstract

In this paper, I study the relationship between directors' experience in target's industry and the acquisition performance. I predict that director experience is positively associated with the acquirer's abnormal announcement returns. However, I find that the market participants only react favorably to diversifying acquisitions if inside directors have target industry experience. My results show that the higher the level of experience of inside directors, the better the abnormal announcement returns supporting the argument that the level of experience matters in the mergers and acquisitions. In addition, I find that the effect of inside directors' experience on acquisition returns is more pronounced when the target is not a public firm, when the CEO does not have any experience in the target industry, and when the acquirer does not employ a top-tier investment bank for acquisition advising.

Comments

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