The effect of interlocking directorates on mergers and acquisitions in Brazil

• Published in: Journal of management and governance Vol. 25; no. 3; pp. 811 - 839
• Main Authors: de Sousa Barros, Thiago, Cárdenas, Julián, Mendes-Da-Silva, Wesley
• Format: Journal Article
• Language: English
• Published: New York Springer US 01.09.2021; Springer Nature B.V
• Subjects: Accounting/Auditing; Acquisitions & mergers; Boards of directors; Business and Management; Companies; Corporate governance; Industrial Organization; Interconnections; Interlocking directorates; Management; Mergers; Regression analysis; Sociology; Time series; Brazil; Brazil; Regression analysis; Mergers and acquisitions; Interlocking directorates; Country-level governance; International level
• ISSN: 1385-3457; 1572-963X
• DOI: 10.1007/s10997-020-09529-7

This study investigates the effect of interlocking directorates on national and international mergers and acquisitions (M&A) in Brazil. Based on a sample of 153 large Brazilian firms in a time series (2000–2015), and using network techniques and regression analysis, this study addresses the hypothesis: board interlocking reduces the asymmetry of information in M&A, leading companies with a greater number of ties (degree centrality) to be more likely to participate in M&A. The results show that firms that have a larger number of ties with other firms through board interlocks (higher degree centrality) are more likely to perform M&A. Other network measures (closeness, eigenvector, betweenness, and structural holes) have no significant impact on the likelihood to participate in M&A. This study examines the impact of board interlocking on firms’ propensity to undertake M&A while controlling for financial, corporate governance, and country-level governance variables in the explanatory model. This paper also contributes by identifying the determinants of M&A performed by companies headquartered in emerging countries such as Brazil, a major participant in M&A processes at the international level.