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RFS Advance Access originally published online on March 26, 2004
Review of Financial Studies 2004 17(4):1185-1215; doi:10.1093/rfs/hhh001
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The Review of Financial Studies Vol. 17, No. 4 © 2004 The Society for Financial Studies; all rights reserved.

Board Composition, Board Effectiveness, and the Observed Form of Takeover Bids

Mary M. Bange
University of South Carolina

Michael A. Mazzeo
Michigan State University

Address correspondence to Michael A. Mazzeo, The Eli Broad College of Business, Michigan State University, East Lansing, MI 48824, or e-mail: mazzeo{at}msu.edu.

We show that bidding firms consider target board characteristics when deciding takeover offer types and initial offer premiums. We study a sample of 436 proposed negotiated mergers and bypass offers. Firms with individuals holding the titles of both chief executive officer (CEO) and board chair are more likely to receive bypass offers. These offers are more likely to be successful and generate higher target shareholder gains over the takeover offer period. When the target's board is independent, the target is less likely to receive a high premium and the offer is less likely to succeed.


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