M&A committees and M&A performance

Abstract

This study examines whether acquirers’ voluntary use of mergers and acquisitions (M&A) committees on boards of directors affects their M&A performance. Drawing on the resource-based theory and Forbes and Milliken’s (1999) theoretical model, we predict and find that acquirers with M&A committees experience higher deal announcement returns and better post-merger performance. The results remain consistent after adopting an entropy balancing approach to alleviate endogeneity concerns. Furthermore, the positive association between M&A committee use and M&A performance is more pronounced when these committees are smaller, meet more frequently, have a higher proportion of directors with financial expertise, and are not fully comprised of independent directors. Overall, our results suggest that M&A committees can provide firms with competitive advantages. These findings have practical implications for corporate managers, directors, investors, and regulators.