Interlocking Board and the Selection of the Target Company: A Study from the Perspective Based on the Resource Dependence Theory

Abstract

Based on resource dependence theory, we have selected 549 M&A events of A-share listed companies from 2003 to 2014 and formed paired samples in M&A according to the different standards using these events, to inspect the role of interlocking board in resolving the information asymmetry problems in M&A. It is shown from results that these companies are more likely to be selected as target companies, which have interlocking board with M&A companies and interlocking board can effectively reduce the information asymmetry in M&A; when there is greater information asymmetry in target companies or M & A companies, private information transmitted by interlocking directors becomes more valuable, so that interlocking board can make use of their information advantage better, which will exert greater impact on M&A target selection. Interlocking board provides effective channels for private information transmission in the process of M&A to mitigate inefficiencies that arise from information asymmetries in target companies or M&A companies.