The Moderating Influence of Multiple Directorships on the Merger and Acquisition Target Size Effect

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This study poses to identify the possible moderating effect of multiple directorships on the target size effect in China. Previous studies have found that target size impacts merger and acquisition (M&A) performance negatively, and therefore poses that smaller targets are more efficient, based on a purely U.S. study. Furthermore, the effect of multiple directorships on M&A performance is unclear in prior literature. This study uses an OLS event-study regression in which the following is found: 1 The target size effect does not hold in China. Moreover, it is found to have the opposite direction. 2 Multiple directorships only influence M&A performance directly in the long run. 3 Most importantly, multiple directorships only influence the target size effect positively in the long run, but this effect is economically negligible. This study contributes to the literature by indicating that cultural differences are important when generalizing theories. Furthermore, only the long-term effect is significantly important. Practitioners can use these results to better coordinate their M&A strategies and achieve higher M&A performance. Future researchers are expected to take into account cultural differences, and might even explore these differences further. Furthermore, they can use better proxies for target size or focus on multiple directorships in more detail. Key words: Mergers and Acquisitions, M&A performance, multiple directorships, cultural differences, target size effect
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