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RFS Advance Access published online on March 26, 2004
Review of Financial Studies, doi:10.1093/rfs/hhh001
Review of Financial Studies © The Society for Financial Studies 2004; all rights reserved
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The Review of Financial Studies © The Society for Financial Studies 2004; all rights reserved.

Original Articles

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

Mary M. Bange 1 and Michael A. Mazzeo 2*
1 Moore School of Business, University of South Carolina, Columbia, SC, 29208
2 Eli Broad College of Business, Michigan State University, East Lansing, MI 48824-1127

* To whom correspondence should be addressed. E-mail: mazzeo{at}bus.msu.edu.


  Abstract

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 by-pass offers. Firms with individuals holding the titles of both CEO and board Chair are more likely to receive by-pass 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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