The influence of board composition on deal premiums in mergers and acquisitions Master Thesis IFM 08-06-2018

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Master Thesis IFM

08-06-2018

The influence of board composition on deal premiums in mergers and

acquisitions

Name: Niek Hamers (s2323605) Supervisor: dr. Nassima Selmane Study programme: MSc IFM

Field keywords: board composition and characteristics, bid premium, M&As, civil and common law

Abstract:

This paper tries to find in which way the board composition and its characteristics, influence the bid premium paid by acquiring companies in M&A deals. The main contribution

of this research is the perspective which is being used, focusing on the board age, gender and size, and the distinction between common and civil law countries. Even though no significant relations were defined between the dependent and independent variables, this research adds

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1

1. Introduction

Recent findings in economic theory suggest that the board of directors fulfil an important role in the governance structure of large business corporations (Fama and Jensen, 1983a; Williamson, 1983, 1984). The composition of these boards differs among corporations. Many board members have a background in finance or have had similar jobs before, which makes them, with their knowledge, a great resource for the corporation.

Nowadays, equality for men and women is an important issue and society also wants this equality to be represented in the corporate environment. Relative to the past, women are more eligible to be appointed as CEO or another high function within a corporation. This shift in board composition might have influences on the company’s performance, due to the fact that women and men might bring different characteristics to the company. Bradshaw, Murray and Wolpin (1992), for example, found that women reduce CEO dominance because of their ‘power sharing’ style and Cassell (1997) has found that having women in key positions can positively influence the long term successes and competitive advantages. Furthermore, women add value to the corporation due to their characteristics and their skillsets (Green and Cassell, 1996), mostly deviating from the characteristics and skillsets of the men in the same positions. Altogether, the composition of the board might not seem of great importance to the functioning of the corporation, but as previous research has shown, both men and women can affect the corporation in their own ways, which makes board composition a rather interesting topic nowadays.

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2 In general, board members are somewhat older business people, with a decent amount of experience gained over the years. Nevertheless, younger business people can bring up fresh perspectives which would not have been put forward by older business people. The combination, a diverse board in terms of age, might improve strategic decisions (Ali, Ng, and Kulik, 2014). Mahadeo, Soobaroyen, and Hanuman (2012), for example, have examined and found a positive relationship between the board diversity in terms of age (and gender) and the return on assets.

Furthermore, the laws and regulations play an important role in the financial organization of a company. Countries have their own laws and regulations, which influences company’s financial performance. Some countries, for example, have a very good investor protection, making it less risky for investors to invest. According to La porta, Lopez-de-Silanes, Shleifer and Vishny (2000), investor protection is crucial because expropriation of minority shareholders by the controlling shareholders is extensive. Furthermore, they state that law and its enforcement are of great influence in the amount of funds raised in one country compared to another. This could be of great influence regarding how much a company is willing to pay. The combination of raising funds easily and a high investor protection, could make companies easy-going, leading them to pay higher bid premiums.

M&As are a quite common ability for corporations to expand. The main goal of M&As is to increase shareholders wealth through the generation of synergies that enhance profitability. However, due to competitiveness within some markets it might be hard to accomplish this increase in shareholders wealth (Mandelker, 1974). The consequences of this competitiveness is that higher sums are being paid, in all probability, too much. This is known as the ‘winners curse’; in an auction, the winner has the tendency to overpay (Ruback, 1982). The excessive amount paid, the premium, can be defined as the bid price above the market value of the target’s share (Diaz, Azofra and Gutiérrez, 2009).

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3 The main contribution of this research is to investigate in what manner the board composition influences the premiums paid in M&As. By looking at the board in terms of age, size and the amount of females, I try to have a view from different perspectives on how the board composition influences the premiums paid in M&A deals. This paper aims to give another insight in the relationship between important board characteristics and M&As, by examining M&As from all over the world, and not just one country or region. This makes the outcomes more valuable and generalizable. Because of the findings by La porta et al. (2000) who state that the law and its enforcement are central to understanding why firms raise more funds in some countries than in other, this research will make a comparison between the deals made in common and civil law countries. With this comparison, I want to investigate whether companies experience differences in the field of M&A between common or civil law countries.

The rest of this paper is constructed as follows; in section two, the theoretical background for this research will be discussed, the hypothesis development is being dealt with in section three, followed by the methodology in section four and the results and conclusions in sections five and six respectively.

2. Theoretical foundation and hypotheses

The main theory behind this research is the Upper Echelon Theory. The Upper Echelon theory states that organizational outcomes, e.g. strategic plans and performances, are partially predicted by managerial background characteristics. In this study, we examine the influence of the board members and their characteristics on the premiums paid by their corporation. Abatecola and Cristofaro (2016) stated that the Upper Echelon theory is based on two intertwined assumptions: one, a firm’s top management acts on the basis of their own personalized interpretations of the strategic situations it faces, and two, these personalized interpretations are functions of the experiences, values, and personality traits of the members belonging to the firm’s top management itself. Thus, according to the Upper Echelon Theory, those board members’ characteristics might influence the organizational outcomes.

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4 Therefore, my sample consists of M&A deals from all over the world, to prevent the results to be biased. Now, the focus will be on the board characteristics and how they are related to higher or lower bid premiums.

First up, I will discuss the board age. Board members can be people of all ages, but in general we see somewhat older and more experienced people within boards than those who are younger and less experienced. An explanation for this, might be found by Grable, McGill and Britt (2009), who found that older individuals are less risk tolerant. According to them, the reasoning behind this is that older people have more knowledge of risk and risky situations, in comparison to younger people. Over time, people learn to better assess their abilities and risk tolerance decreases (Berger, Kick and Schaeck, 2012).

According to what is mentioned above, a relatively older board should be desirable, because older board members are more risk averse and will therefore most likely take less risk when acquiring another company. The lower risk-taking could be expressed in a lower bid premium. Although this sounds logical, it might be hard to translate into a measurable hypothesis, because there is not “one perfect age” for a board director regarding risk taking. In sum, I suggest that, because older board members are more risk averse, they will resist against high bid premiums, resulting in the following hypothesis:

(H1): There is a negative relationship between the board members’ average age and the bid premium.

The second board characteristic which I will discuss, is gender. At first sight, most people might overlook the differences in influence that male and female board directors have on the company, because we don’t realize that man and women might give lead in another way. For instance, Bradshaw et al (1992), found that women reduce CEO dominance because of their ‘power sharing’ style and Cassell (1997) has found that having women in key positions can positively influence the long term successes and competitive advantages. On the other hand, male directors are linked to more agentic characteristics, like being more aggressive, ambitious, dominant, self-confident and competitive (Eagly and Johannesen-Schmidt, 2001).

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5 therefore state that the presence of both male and female directors is most preferable. The upcoming roll of women in high positions and their proven leadership skills, which differ from their male peers, are important, and I suggest that a board with a female/ male ratio of 1 is most preferable. From now on, I will refer to this as an ‘equally diversified board in terms of gender’. The hypothesis regarding this board characteristic is stated as follows:

(H2): A more equally diversified board in terms of gender has a positive effect on the bid premium.

The last board characteristic which will be discussed, is the number of directors on the board. According to Dalton, Daily, Johnson and Ellstrand (1999), and Dalton and Dalton (2005), the advantage of larger boards is the availability of information that the board possesses, helping the overall company to a better performance. However, most of the literature contradict this finding, to begin with Yermack (1996), who finds that companies have a higher market value when the boards are small. Furthermore, he states that smaller boards are more likely to resist towards their CEO after periods of poor performance and that CEO compensation is far more sensitive to performance in companies with small boards. In relationship to paying high bid premiums, this findings could make a CEO think twice before over-paying.

Also, most of the US empirical studies have found a negative relationship between board size and firm performance (Guest, 2009). Furthermore, in comparison to bigger boards, smaller boards can communicate, coordinate and make decisions more easily, which is why they are preferable (Lipton and Lorsch, 1992; Jensen, 1993).

As we see, most literature states that smaller boards are preferable, however there is no consensus over what an ideal board size should be. I will, therefore, assume that bigger boards will have an increasing effect on the bid premium, and smaller boards are preferable. This leads to the following hypothesis:

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6 other liberties, in respect to the civil law system. Also Graff (2007) concludes that the common law system provides a more favorable basis for financial development and economic growth. Furthermore, he states that investor protection in common law countries should be at a higher level than in civil law countries. This same conclusion was drawn by Mahoney (2001), who also found that common law countries provide a higher level of investor protection. This increased investor protection makes it less risky for investors to make investments, which might lead to excessive payments, or higher bid premiums.

With this knowledge in mind, it is really interesting to see whether there are differences within this sample, when I solely look at the companies operating in a civil law system or companies operating in a common law system. Based on the previous literature, I would expect the relationships in common law countries to be stronger in comparison to the relationships found in civil law countries, due to their more favorable basis for financial development and economic growth, and their superior investor protection. The hypothesis regarding the differences in legal systems, is the following:

H(4): The influence of all three independent variables on the bid premium is expected to be stronger in common law countries than in civil law countries.

Below, an conceptual model is shown to give a clear view of the hypothesis and what is being tested for in this research.

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7 Common law (H4):

In the conceptual model the difference between the common and civil law countries cannot be shown, but as just mentioned, hypothesis 4 states that the relationships found in common law sample are stronger than those found in the civil law sample.

3. Data and Methodology

This study examines the relationship between board characteristics and how those characteristics influence the bid premiums paid in M&As. For this research, the Orbis database is used to gather data about M&A deals, which is complemented with data from BoardEx about board characteristics and board composition, as well as with data from the Worldbank regarding the control variables.

The original sample included 35 OECD countries in the most recently available period, namely from 2013 to 2017. This time-frame is chosen to make sure the results of this study are valuable, and not outdated, in this rapidly changing economic environment. I chose to use data from 35 OECD countries, because those countries differ in their overall development and are from different continents. Therefore, the results of this study might be more valuable and more easily generalizable. A cross-national study is preferable because national norms and values could influence the height of a bid premium, and by using a cross-national sample those differences might become observable. After excluding the uncompleted and unconfirmed deals, a dataset of 1,143 completed deals remained. I chose not to specify the sample to a single industry or a single method of payment, too make sure the range of this research is as broad as

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8 possible. There are, however, some distinctions made within the sample, which will be discussed later.

Next, I linked the sample data regarding the board composition and board characteristics to the sample data about the deals. Some companies were excluded from the dataset because there was no data available regarding their board composition and characteristics. This resulted in a usable dataset of 271 companies, from 22 different countries. The deals in this sample vary a lot. For example, it contains cross-border deals, as well as domestic deals. Within the sample, there are 107 full acquisition, 20 minority stake deals (<50%), 124 acquisitions to increase the stake to over 50%, 14 share buy-backs and 6 deals where the stake is unknown. Of all 271 companies, there are 144 companies with both males and females on the board. The other 127 companies only have male board members. Appendix A gives an overview of the deals, including the acquirors name, the targets name, the bid premium, percentage of females on the board, the board size and the average age.

Table 1 presents an overview of the origin of the acquiring companies. In Appendix B, a more elaborate overview of the countries of origin is given.

Table 1, an overview of the origin of continent of the acquiring companies.

Continent Amount of countries Amount of companies in dataset Whereof civil law based companies Whereof common law based companies Europe 11 81 81 0 North-America 2 34 0 34 Rest of the World 9 156 106 50 Total 22 271 187 84

In order to analyze the relationship between board composition and premiums paid in M&A deals, the following regression model is constructed:

Model(1): 𝐵𝑖𝑑 𝑝𝑟𝑒𝑚𝑖𝑢𝑚𝑖𝑗 = 𝛽0+ 𝛽1∗ 𝐵𝑜𝑎𝑟𝑑 𝑎𝑔𝑒𝑖𝑗+ 𝛽2∗ 𝐵𝑜𝑎𝑟𝑑 𝑔𝑒𝑛𝑑𝑒𝑟𝑖𝑗 + 𝛽3∗

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* In the regression model, “i” is the subscript that refers to the firm and “j” is the subscript that refers to the country.

The dependent variable, the bid premium, is the premium the acquiring company pays to the target, related to the M&A deal. The M&A premium is calculated based on the target’s market value at the rumor date. I take the difference between the total market value of the target and what has been paid for the target (Diaz et al., 2009). I divide the premium by the total deal value, to turn it into a percentage, which will be used in the regression.

The first independent variable is board age. The hypothesis about age was that older boards tend to have a positive influence on the bid premiums, because of the experience older board members bring into the boardroom. Therefore, I compute an average board age per company and regress this average on the bid premiums paid.

The second independent variable is board gender. Per board, an overview of the amount of male and female directors was collected. For the regression, I will use a ratio of female/male to see if there is any significant difference in the height of the bid premium. I expect an equally diversified board in terms of gender, so a female/ male ratio of 1, to be the most preferable in relation to low bid premiums, because the female leadership characteristics might have a positive influence on the financial performance of the company. So, for the regression, this means that a higher ratio, i.e. proportionally more females on the board, should be negatively related to the bid premium.

The third independent variable is board size. As discussed earlier, there is some controversy about what is the best possible board size, but overall most literature state that a smaller board is more preferable (Lipton and Lorsch, 1992; Jensen, 1993). I assumed there would be a negative relationship between board size and premiums paid, so a regression of the board sizes on the bid premium should give insights in whether or not this is true.

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10 average, common law systems have a higher investor protection. So, including investor protection as control variable could be valuable for this research. On firm-level, I control for firm size. Firm size is being measured as the firms total assets. I control for firm size because larger firms are assumed to have more resources and might therefore be more easily willing to overpay in M&As. On deal-level, I control for deal size. The deal size is being measured in euros. The reasoning for this control variable is in line with the reasoning for the firm size as control variable; larger deals are often made by larger firms, who have more resources and therefore the bid premium could be higher as well.

4.

Results

The descriptive statistics of all variables are shown in table 2. The firm size and the GDP per capita are not logged yet, but their logarithms will be used in the actual regressions.

As we can see, the average deal size is 962,38 million euro. Furthermore, the difference between the minimum and maximum deal size is markable, The largest deal in the sample is a

full acquisition deal between two major companies, with a value of 24,38 billion euro. The smallest deal however, is only 950 euro, and is a minority stake increase of only 0.002%. I included those minority stake deals, because Ouimet (2012) came to the conclusion, that minority stake deals are of influence because they can facilitate the flow of information between two firms, allowing the acquirer to better assess the value of the target and expected synergies, before committing to purchasing a majority stake. So, a minority stake deal can be a first step to a full acquisition, and therefore even those small increases in the minority stakes are being

Table 2

Descriptive statistics

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11 taken into account in this research. We furthermore see a large standard deviation, which again, is caused by the large differences between the deal values. In the deal premiums, we do not see this contrast as much as in the real valuation of the deals. There is an average deal premium of 29.89%. Nevertheless, there are deals in the sample for which a negative deal premium was registered (a minimum of -64.63%). This means that the deal value was below the market value of the acquired company. In fact, this occurs more often than people think. Weitzel and Kling (2017) dedicate their whole article to negative bid premiums and why they occur, with one of the reasons being overvaluation of the target. Further, the average board age is, as expected, quite high; approximately 58 years. We see that 40 years is the average age of the youngest board, opposed to 67.11 years for the oldest board. Furthermore, the female/male ratio is quite low. The average is 0.15, which means that less than 15% of the board members is a female. We do see that the maximum ratio is 1, meaning that the maximum amount of females in one board is half of the board members. The average board size is approximately 10. We see a standard deviation of 4.82 here, with a maximum board size of 30 people and a minimum of 4.

As we see at the firm size, there are quite some differences between the amounts. The average firm size before logging is €10.511.117.000, with a standard deviation of €3.227.220.000. The largest firm in the sample is €140.585.440.000, which is the main reason for using the logarithm of the firm size in the regression. The smallest firm size in this sample seems quite small, with a value of €1.750.000, but that is because it is a department of a company which is the acquiring ‘firm’, which causes the firm size to seem very small. As explained before, these small acquisition are being taken into account, because, as Ouimet (2012) found, minority stake deals are of influence because they can facilitate the flow of information between two firms, allowing the acquirer to better assess the value of the target and expected synergies, before committing to purchasing a majority stake.

For the GDP per capita, the same problem occurs; the differences here are not as large as with the firm size, but they are still quite large, with the highest GDP per capita being €79.891 and the smallest being €1.710. The average GDP per capita is €41.342. At last, the investor protection is 63.86 on average, with a quite small standard deviation.

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12 Furthermore, table 3 shows us that most correlations are below 0.3, which is desirable.

In table 4 below, an overview of the outcomes of the regressions is shown. The first column, shows the regression of the independent variables board age, on the dependent variable, without including the control variables. We see that the average age is negatively related to the bid premium, with a coefficient of -0.364. This would mean that, the greater the average board age, the smaller the bid premium. According to most of the current literature, this would be expected. Nevertheless, the coefficient is highly insignificant, which means I cannot draw conclusions from here.

The second column shows the interaction effects of the female/ male ratio on the bid premium. Here, we see a positive relationship between the female/ male ratio and the bid premium. This implies that an increase of the amount of women on the board, in respect to the amount of men on the board, would also increase the bid premium. This is contradictory to most of the current literature, because the female leadership characteristics were expected to have a decreasing effect on the bid premium. Nevertheless, also here, no conclusions can be drawn from this result as the coefficient is highly insignificant. The third column shows the interaction effects of the board size to the bid premium. There is a small, negative relationship between the board size the deal premium, with a coefficient of -0.007. An increase in board size would mean a decrease in the deal premium, which is not in line with the hypothesis. I expected the relation to be positive due to fact that smaller boards can communicate, coordinate and make decisions

Table 3 Correlation matrix Variables 1 2 3 4 5 6 7 8 1 Bid premium 1.00 2 Average age 0.209** 1.00 3 Female/ male ratio 0.091 -0.231*** 1.00 4 Board size 0.027 0.392*** -0.301*** 1.00 5 Firm size 0.324*** 0.261*** 0.014 0.368*** 1.00 6 Investor protection 0.103 0.060 0.244*** -0.200*** -0.060 1.00 7 GDP per capita 0.169*** -0.097 0.088 -0.127* -0.043 -0.264*** 1.00 8 Deal value 0.583*** 0.199*** 0.113* 0.009 0.392*** 0.070 0.200*** 1.00 This table reports Pearson correlation coefficients between each pair of variables.

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13 more easily. Nevertheless, the coefficient is highly insignificant, so I cannot draw conclusions from this result.

In the fourth column, all independent variables are included and regressed on the bid premium. We see, that the coefficient of the average age has slightly decreased, but is still highly insignificant. The coefficient of the female/ male ratio decreased from 2.503 to 0.798. However, due to the coefficient being still insignificant, the change is meaningless. Then, we have the board size. The direction of this coefficient reversed, from being negative to positive.

Table 4

Regression results with OLS: Bid premiums, board age, board size, female/male ratio

Variables Bid premium

(1) (2) (3) (4) (5) (6) family deals (7) non-family deals Average age -0.364 -0.370 0.011 0.023 0.015 (0.424) (0.457) (0.495) (0699) (0.357) Female/ male ratio 2.503 0.798 -0.069 0.285 -0.167 (0.825) (0.947) (0.852) (0.868) (0.650) Board size -0.007 0.002 0.001 0.003 0.000 (0.800) (0.945) (0.298) (0.265) (0.704) Firm size -0.064 0.027 -0.079* (0.134) (0.893) (0.066) Investor protection 0.016 0.012 0.011 (0.169) (0.697) (0.375) GDP per capita 0.012 -0.12 0.011 (0.919) (0.696) (0.939) Deal size 1.008*** 1.037*** 1.016*** (0.000) (0.000) (0.000) Constant 51.146 * 29.510 *** 30.319* ** 51.272* -2.054 -4.251 -1.629 (0.056) (0.000) (0.000) (0.077) (0.288) (0.450) (0.427) Number of deals 271 271 271 271 271 55 216 Countries 22 22 22 22 22 13 19 Adjusted R-squared -0.009 0.033 0.033 0.039 0.819 0.773 0.842

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14 The coefficient is still relatively small, namely 0.002, but the positive relation is in line with the hypothesis. However, the coefficient is still highly insignificant.

The fifth column, includes all independent variables, the dependent variable and the control variables. The average board age became positive although it is still insignificant. Both the direction of the relationship and the insignificance are reasons for me to reject hypothesis one. The same accounts for the female/ male ratio, where the relationship is negative but highly insignificant, leading me to the conclusion that I have to reject hypothesis two. The last dependent variable is board size. Here, we still see a very small coefficient, which is insignificant. The direction of the relationship found, a positive one, is in line with the hypothesis but again, due to the insignificance, the hypothesis must be rejected. Also all control variables, except deal value, are insignificant. When focussing on the deal value, we see there is a positive coefficient of 1.008, which is highly significant. This is in line with the expectation; larger deals have higher bid premiums. Furthermore, we see a big increase in the R squared, which is most probably caused by the deal size. Then, when focussing on column 6 and 7, I made a distinction between family-deals and non-family-deals. With family-deals, deals between mother-/daughter- companies are meant. In column 6, we see that there are no significant relationships at any of the independent variables. Only the deal value, again, is highly significant, with a coefficient of 1.037. In comparison to the non-family-deals, there are not that many differences in the results. The most remarkable difference is noticed at the control variable firm size. Where the firm size was insignificant in the family-deals subsample, it is significant in the non-family-deals. This could imply that firm size plays a role in non-family deals, where it does not in family-deals. That could be explained by the fact that family-deals are more friendly on average and the firm size does not have to play a role in this. When two non-related firms are in a merger, the size of the acquiror could have influence due to the resources it has available.

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15 Column 2 shows the results of the regression of the independent variables on the dependent variable of the civil law subsample, including the control variables. As we see here, compared to column one of this table, still all independent variables are insignificant. However, it is remarkable that the direction of the female/male ratio reversed despite being still insignificant. The most remarkable here is, again, the coefficient of the deal value, which is highly significant. We could conclude that in civil law countries, the deal value is a major explanatory variable for the bid premium. A higher deal value would implicate that the bid premium is also higher for those deals. However, we see these same results in column four of this table. So that would mean that it is not depending on the civil law countries or the common law countries for the deal value to be an influencer of the bid premium. I will come back to this after discussing the results of the third column.

Taking a look at the third column, the common law subsample, we see that the average age has a significant, negative relationship with the bid premium, with a coefficient of -2.177. This implies that in common law countries, the presence of proportionally more females on the board has a negative effect on the bid premium. This means that if there are proportionally more women on the board, the bid premium will decrease, which is in line with what I expected and stated in hypothesis two. Furthermore, both the female/ male ratio and the board size have a negative coefficient which is highly insignificant.

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16 This might be due to the fact that, as described by Graff (2007), the common law system provides a more favorable basis for financial development and economic growth. This economic growth could be expressed in stability and therefore companies see no reason in overpaying for M&As. For the investor protection, nothing much changed between the common law and the civil law subsample. So in both the civil law subsample and the common law subsample, there is an insignificant relationship between the investor protection and the bid premium. According to the literature, the common law countries have a higher ranked investor protection, so you would expect a significant relationship between the two variables. This is contradicting hypothesis 4, where I expected the common law subsample to have stronger relationships between the independent variables and the dependent variable. Regarding the

Table 5

Regression results with OLS: Deal premiums, board age, board size, female/male ratio

Variables Bid premium

Civil law companies Common law companies

(1) (2) (3) (4)

Average age 0.398 0.026 -2.177** -0.028

(0.476) (0.166) (0.036) (0.386)

Female/ male ratio 7.808 -0.181 -7.214 -0.357

(0.560) (0.700) (0.773) (0.580) Board size -0.003 0.000 -0.143 0.013 (0.922) (0.991) (0.523) (0.128) Firm size 0.000 -0.144* (0.994) (0.099) Investor protection 0.017 0.031 (0.271) (0.166) GDP per capita -0.026 0.291 (0.861) (0.404) Deal value 1.044*** 0.938*** (0.000) (0.000) Constant 4.829 -4.643* 164.34*** -1.090 (0.880) (0.063) 0.008 (0.831) Number of deals 187 187 84 84 Countries 17 17 5 5 Adjusted R-squared 0.004 0.843 0.060 0.791

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17 independent variables and the bid premium, the common law subsample does not score significantly better than the civil law subsample, which is why I have to reject hypothesis four.

Conclusions

I examined the effect of board age, the amount of females on the board and the board size, on the bid premiums paid in M&As. There has been controversy in the existing literature whether these variables are positively or negatively related. I tried to give another perspective to this topic by examining a widely varying sample, excluding effects which could be bound to only one country or region.

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18 The main contribution of this research is the distinction between the common and civil law countries. Although no significant results were found in this research, other research has found differences between common and civil law countries and the way they influence companies (Graff, 2007; Mahoney 2001). Further research could continue researching this distinction between common and civil law countries, as there is a lot to explore about the differences between the two, in financial ways. Also, as said before, the relationship between board composition and bid premium is a not very often studied one. I hoped to find significant relationships which could improve companies financial performance by paying attention to the way the board is being composed, but unfortunately I did not find significant relationships.

A major limitation for this research is the sample size. Gathering data about the deals only, resulted in a dataset of 1,143 deals. Nevertheless, because the corresponding data about the board characteristics and composition was not available for all acquiring companies, only a dataset of 271 companies remained. A more specified research, focused on one or two industries for example, might give other insights in this relationship.

Another limitation for this research is the variety within the data sample. This research contained data from 35 OECD countries from all over the world, whereas a research focusing on a single country or just a few countries could gather quite different insights in this relationship. A suggestion for future research would therefore be, to focus more specifically on separate regions or countries. To keep the focus on the differences between civil and common law systems, it would be beneficial for follow-up research to choose a small sample of countries varying in their law system and compare those results, in contrast to the widely varying sample which I used.

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5.

Appendices

Appendix A

Acquiror name Target name Deal type Deal value (€)

Bid premium (%) #board members female to male ratio average age

HERA SPA ACEGASAPS SPA

Acquisition increase to >50% 105.499.000 50,28 19 11,76 58,32 USHIO INC ADTEC ENGINEERING CO., LTD Acquisition increase to >50% 7.866.890 2,39 11 0,00 61,82 AUBAY SA AEDIAN SA Acquisition increase to >50% 8.209.000 99,41 12 20,00 55,40 FRAPORT AG AERODROM LJUBLJANA DOO Acquisition increase to >50% 57.329.000 8,33 24 26,32 58,47

ICADE SA ANF IMMOBILIER SA

Acquisition increase to

>50% 116.848.000 5,03 15 36,36 52,14

VALLOUREC SA

ANHUI TIANDA OIL PIPE CO., LTD

>50% 59.224.650 58,10 15 50,00 57,33

ASICS CORP ASICS TRADING CO., LTD

>50% 57.910.800 34,41 9 0,00 60,00

ASICS CORP ASICS TRADING CO., LTD

Acquisition increase to >50% 7.019.380 5,55 9 0,00 60,00 ASSECO POLAND SA ASSECO CENTRAL EUROPE AS Acquisition increase to >50% 6.616.130 -7,66 17 0,00 53,17 WILLIAM DEMANT

HOLDING A/S AUDIKA GROUPE SA

Partial acquisition

>50% 90.699.000 31,78 7 40,00 51,43

WILLIAM DEMANT

HOLDING A/S AUDIKA GROUPE SA

>50% 77.501.000 31,78 7 40,00 51,43

TKH GROUP NV AUGUSTA TECHNOLOGIE AG

>50% 21.409.000 8,02 8 14,29 57,13

BW LPG LTD AURORA LPG HOLDING ASA

>50% 35.743.820 34,58 7 16,67 54,00

CANON INC AXIS AB

Partial acquisition >50% 2.565.313.350 50,44 17 0,00 63,65 KGHM POLSKA MIEDZ SA BIPROMET SA Acquisition increase to >50% 3.315.240 79,71 14 7,69 56,71 GREAT PANTHER SILVER LTD CANGOLD LTD Acquisition increase to >50% 1.202.180 -24,00 6 0,00 62,00 YAHOO JAPAN

CORPORATION CARVIEW CORPORATION

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20

PEET LTD CIC AUSTRALIA LTD

Partial acquisition

>50% 46.188.590 -4,76 6 0,00 65,00

ITALCEMENTI

SPA CIMENTS FRANCAIS SA

Acquisition increase to >50% 429.258.000 21,26 15 25,00 60,13 COCA-COLA WEST COMPANY LIMITED COCA-COLA EAST JAPAN CO., LTD Partial acquisition >50% 2.237.528.130 14,24 15 7,14 60,47 ACKERMANS &

VAN HAAREN NV COMPAGNIE D'ENTREPRISES CFE SA

Acquisition increase to >50% 39.000 3,59 9 12,50 52,44 CHIESI FARMACEUTICI SPA CORNERSTONE THERAPEUTICS INC. Acquisition increase to >50% 79.063.190 77,57 8 14,29 58,00

AEON CO LTD DAIEI INC., THE

>50% 194.516.470 6,45 9 0,00 67,11

TOYOTA MOTOR CORPORATION

DAIHATSU MOTOR CO., LTD Acquisition increase to >50% 3.247.642.850 20,84 13 0,00 64,23 DAIWA HOUSE INDUSTRY CO LTD DAIWA ODAKYU CONSTRUCTION CO., LTD Acquisition increase to >50% 91.877.440 29,93 21 0,00 62,33 MITSUBISHI

ELECTRIC CORP DELCLIMA SPA

>50% 169.494.000 88,63 12 0,00 66,00

DENSO CORP DENSO INDIA LTD

>50% 12.808.170 174,10 15 0,00 63,36

ALSTRIA OFFICE

REIT AG DO DEUTSCHE OFFICE AG

Partial acquisition >50% 797.667.000 23,23 8 14,29 51,88 BUZZI UNICEM SPA DYCKERHOFF AG Acquisition increase to >50% 32.749.000 17,93 13 18,18 58,31 ADLER REAL ESTATE AG ESTAVIS AG Partial acquisition >50% 47.453.000 9,40 4 0,00 50,00 DEMIRE DEUTSCHE MITTELSTAND

REAL ESTATE AG FAIR VALUE REIT-AG

Partial acquisition

>50% 87.711.000 9,53 5 0,00 51,00

FONCIERE DE

PARIS SIIC FONCIÈRE PARIS FRANCE SA

>50% 277.497.000 7,61 12 33,33 55,67

PATRIMOINE ET

COMMERCE SA FONCIERE SEPRIC SA

>50% 77.648.000 208,98 14 7,69 60,36

PATRIMOINE ET

COMMERCE SA FONCIERE SEPRIC SA

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21

RALLYE SA GROUPE GO SPORT SA

>50% 3.116.000 114,12 10 25,00 57,70

SAFRAN GROUPE STERIA SCA

Partial acquisition >50% 647.073.000 36,85 18 38,46 58,11 VIVENDI SA HAVAS SA Acquisition increase to >50% 1.596.166.000 8,84 19 46,15 51,84

HITACHI LTD HITACHI MEDICAL CORPORATION

Acquisition increase to >50% 188.606.310 34,53 16 14,29 66,47 HOKURIKU ELECTRIC POWER CO HOKURIKU ELECTRIC CONSTRUCTION COMPANY Acquisition increase to >50% 30.554.580 22,13 11 0,00 61,50 TPG TELECOM LTD IINET LTD Acquisition increase to >50% 905.903.610 38,21 5 0,00 56,20 HIKARI TSUSHIN

INC INTEA HOLDINGS, INC.

Acquisition increase to >50% 24.973.380 22,04 4 0,00 44,75 QUINENCO SA INVEXANS SA Acquisition increase to >50% 55.159.500 2,04 8 0,00 54,14 MITSUBISHI GAS CHEMICAL

COMPANY INC JSP CORPORATION

Acquisition increase to >50% 57.338.340 18,69 11 0,00 61,91 KDDI CORP JUPITER TELECOMMUNICATIONS CO., LTD Acquisition increase to >50% 1.707.020.290 48,73 12 0,00 59,83

AIR WATER INC KAWAMOTO CORPORATION

Partial acquisition

>50% 7.442.250 45,37 18 0,00 64,67

AIR WATER INC

KAWASAKI KASEI CHEMICALS LTD Partial acquisition >50% 29.127.170 33,76 18 0,00 64,67 HIKARI TSUSHIN

INC KEIOZU HOLDINGS CO., LTD

>50% 12.472.230 66,17 4 0,00 44,75

KLEPIERRE SA KLÉMURS SCA

>50% 32.249.000 36,67 12 33,33 56,25

BNK FINANCIAL

GROUP INC KYONGNAM BANK CO., LTD

>50% 258.073.630 4,58 8 0,00 64,50

MITSUBISHI

CORP LAWSON INC.

Acquisition increase to >50% 1.192.997.060 16,73 14 7,69 65,75 ENEA SA LUBELSKI WEGIEL BOGDANKA SA Partial acquisition >50% 345.404.590 28,78 10 42,86 40,00 NTT DOCOMO

INC MAGASEEK CORPORATION

>50% 16.573.960 32,35 13 0,00 57,31

NOMURA REAL ESTATE

HOLDINGS INC MEGALOS CO., LTD

>50% 24.506.340 23,38 8 0,00 56,25

NOMURA REAL ESTATE

HOLDINGS INC MEGALOS CO., LTD

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22 SOMPO JAPAN

NIPPONKOA

HOLDINGS INC MESSAGE CO., LTD

Acquisition increase to >50% 323.834.040 48,68 12 20,00 58,50 MITSUI & CO LTD MITSUI KNOWLEDGE INDUSTRY CO., LTD Acquisition increase to >50% 92.974.180 37,84 13 30,00 64,91 MARINE HARVEST

ASA MORPOL ASA

>50% 98.696.040 38,55 10 66,67 50,00

NEC

CORPORATION NEC FIELDING LTD

Acquisition increase to >50% 206.823.520 35,16 11 10,00 62,64 NIDEC CORP NIDEC COPAL CORPORATION Acquisition increase to >50% 115.105.180 12,72 9 12,50 62,89 NIDEC CORP NIDEC COPAL ELECTRONICS CORPORATION Acquisition increase to >50% 136.353.770 10,92 9 12,50 62,89 NIDEC CORP NIDEC TOSOK CORPORATION Acquisition increase to >50% 58.629.240 21,15 9 12,50 62,89

NIDEC CORP NIDEC-READ CORPORATION

Acquisition increase to >50% 61.326.850 14,78 9 12,50 62,89 KYOCERA CORP NIHON INTER ELECTRONICS CORPORATION Partial acquisition >50% 89.121.410 8,24 14 27,27 59,18 KYOCERA CORP NIHON INTER ELECTRONICS CORPORATION Acquisition increase to >50% 39.287.180 9,09 14 27,27 59,18

NIPPON STEEL & SUMITOMO METAL

CORPORATION

NIPPON STEEL & SUMIKIN TEXENG CO., LTD

>50% 189.232.470 14,14 15 0,00 62,33

BROTHER

INDUSTRIES LTD NISSEI CORPORATION

>50% 94.852.960 36,64 6 0,00 67,00

CORPORATION NISSHIN STEEL CO., LTD

Acquisition increase to >50% 630.076.330 43,74 15 0,00 62,33 NTT DATA CORPORATION NJK CORPORATION Acquisition increase to >50% 40.066.030 40,33 10 0,00 59,40 AUSTEVOLL

SEAFOOD ASA NORWAY PELAGIC ASA

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23 PANASONIC CORP PANASONIC INDUSTRIAL DEVICES SUNX CO., LTD Acquisition increase to >50% 122.083.260 16,14 16 6,67 62,44 PANASONIC CORP PANASONIC INFORMATION SYSTEMS CO., LTD Acquisition increase to >50% 95.305.480 13,54 16 6,67 62,44 HIKARI TSUSHIN

INC PION CO., LTD

Acquisition increase to >50% 23.014.800 22,10 4 0,00 44,75 CANCOM SE PIRONET NDH AG Acquisition increase to >50% 37.591.000 6,67 7 16,67 50,33

ORKLA ASA RIEBER & SØN ASA

>50% 67.846.790 80,83 11 83,33 52,11

DANFOSS A/S SAUER-DANFOSS INC.

Acquisition increase to >50% 527.954.820 48,55 12 0,00 55,83 VOLKSWAGEN AG SCANIA AB Acquisition increase to >50% 6.596.029.940 49,03 28 12,00 57,19

SEADRILL LTD SEVAN DRILLING ASA

>50% 23.370 16,18 7 40,00 54,29

SHARP

CORPORATION SHARP INDIA LTD

>50% 10.380 -11,22 13 8,33 62,73

EUROSIC SA SIIC DE PARIS SA

Acquisition increase to >50% 84.266.000 24,44 12 71,43 58,17 SK TELECOM CO LTD SK BROADBAND CO., LTD Acquisition increase to >50% 558.815.460 -3,37 6 0,00 58,83 SK TELECOM CO LTD SK COMMUNICATIONS CO., LTD Acquisition increase to >50% 35.568.040 2,33 6 0,00 58,83

VIVENDI SA SOCIETE D'EDITION DE CANAL PLUS SA

Acquisition increase to >50% 521.966.000 25,39 19 46,15 51,84 ICADE SA SOCIÉTÉ IMMOBILIÈRE DE LOCATION POUR L'INDUSTRIE ET LE COMMERCE SA Acquisition increase to >50% 668.784.000 0,18 15 36,36 52,14 ICADE SA SOCIÉTÉ IMMOBILIÈRE DE LOCATION POUR L'INDUSTRIE ET LE COMMERCE SA Acquisition increase to >50% 100.874.000 3,35 15 36,36 52,14

JTEKT CORP SONA KOYO STEERING SYSTEMS LTD

Acquisition increase to >50% 58.441.390 14,99 10 0,00 64,20 DOWNER EDI LTD SPOTLESS GROUP HOLDINGS LTD Acquisition increase to >50% 572.119.700 -2,54 8 60,00 62,14 RIO ALTO

MINING LTD SULLIDEN GOLD CORPORATION LTD

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24 NIPPON STEEL &

SUMITOMO METAL

CORPORATION

SUMITOMO PIPE & TUBE CO., LTD Acquisition increase to >50% 105.151.120 12,98 15 0,00 62,33 SUMITOMO REALTY & DEVELOPMENT CO LTD SUMITOMO REAL ESTATE SALES CO., LTD

>50% 487.718.580 16,35 12 0,00 62,83

CORPORATION SUZUKI METAL INDUSTRY CO., LTD

Acquisition increase to >50% 45.370.750 16,94 15 0,00 62,33 KUKA AG SWISSLOG HOLDING AG Partial acquisition >50% 258.762.470 6,30 14 7,69 55,33 AXWAY SOFTWARE SA SYSTAR SA Acquisition increase to >50% 21.931.000 21,59 10 25,00 57,70 MITSUBISHI CHEMICAL HOLDINGS CORP

TAIYO NIPPON SANSO CORPORATION

>50% 735.393.390 28,43 8 0,00 64,25

ALMA MEDIA

CORP TALENTUM OYJ

Acquisition increase to >50% 36.844.000 12,74 7 16,67 53,71 SAFRAN TECHNOFAN SA Acquisition increase to >50% 7.471.000 28,27 18 38,46 58,11 HITACHI CHEMICAL CO LTD THAI STORAGE BATTERY PCL Acquisition increase to >50% 59.863.590 54,93 11 10,00 63,55 TOHO GAS CO

LTD TOHO REAL ESTATE CO., LTD

Acquisition increase to >50% 130.151.070 31,96 9 0,00 61,11 MURATA MANUFACTURING CO LTD TOKO, INC. Acquisition increase to >50% 162.685.580 82,65 6 0,00 62,00 MURATA MANUFACTURING CO LTD TOKO, INC. Acquisition increase to >50% 113.294.020 -1,94 6 0,00 62,00 MURATA MANUFACTURING

CO LTD TOKYO DENPA CO., LTD

Acquisition increase to >50% 29.438.620 30,79 6 0,00 62,00 TOKYO TATEMONO CO LTD TOKYO TATEMONO REAL ESTATE SALES CO., LTD

>50% 18.413.540 -35,47 9 0,00 62,88

TOYOTA TSUSHO

CORPORATION TOMEN ELECTRONICS CORPORATION

>50% 108.714.450 39,01 13 0,00 60,38

TUI AG TUI TRAVEL PLC

Acquisition increase to >50% 3.503.729.140 12,64 18 28,57 52,82 NETGEM SA VIDÉO FUTUR ENTERTAINMENT GROUP SA Partial acquisition >50% #WAARDE! 66,67 6 20,00 53,33 ASAHI GLASS CO LTD VINYTHAI PCL Acquisition increase to >50% 62.100 -17,58 7 16,67 65,00

VOESTALPINE AG VOESTALPINE VAE APCAROM SA

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25 RWE AG VÝCHODOCESKÁ PLYNÁRENSKÁ AS

>50% 2.162.020 -24,66 24 14,29 59,42

HIKARI TSUSHIN

INC WATER DIRECT CORPORATION

Acquisition increase to >50% 12.995.690 2,81 4 0,00 44,75 AEON CO LTD WELCIA HOLDINGS CO., LTD Acquisition increase to >50% 151.189.110 41,84 9 0,00 67,11 ADLER REAL ESTATE AG WESTGRUND AG Partial acquisition >50% 408.653.000 6,38 4 0,00 50,00 BANDAI NAMCO

HOLDINGS INC WIZ CO., LTD

Partial acquisition

>50% 1.995.610 -64,63 9 0,00 59,11

BANDAI NAMCO

HOLDINGS INC WIZ CO., LTD

>50% 6.875.060 36,59 9 0,00 59,11

WUMART STORES

INC WUMART STORES INC.

>50% 21.520 -46,05 7 16,67 53,29

WUMART STORES

INC WUMART STORES INC.

>50% 422.922.800 90,80 7 16,67 53,29

YASKAWA ELECTRIC

CORPORATION YE DATA INC.

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26

Appendix B

Overview of the countries and their legal origins Country

Number of

companies Common law Civil law

(28)

27

6.

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