Corporate Governance and M&A Deal Uncertainty: Evidence from Merger Arbitrage Spreads

Sammanfattning

This study examines whether board-level governance characteristics of acquiring firms are associated with ex ante uncertainty about M&A deal completion, measured through merger arbitrage spreads at announcement. Using a sample of 947 deals announced between 2003 and 2024 across international markets where both parties are publicly listed, we estimate OLS regressions of arbitrage spreads on four governance mechanisms (board size, board independence, CEO duality, and female director share), with deal-level and firm-level controls and year, country, and industry fixed effects. One of the four mechanisms produces a statistically detectable association with the arbitrage spread at the 5 percent level. Board size enters with a negative coefficient consistent with an advisory capacity interpretation, and the association is largest when the acquirer and target operate in different industries. CEO duality enters with a marginally significant positive coefficient (p = 0.052), directionally consistent with the entrenchment channel but not meeting the conventional threshold. Board independence and the female directors share are not robustly associated with arbitrage spreads, although the independence coefficient reaches significance in the non-US subsample. The bid premium dominates the explanatory variation. The findings indicate that governance characteristics affecting completion uncertainty operate through the board size and leadership structure rather than through the share of independent or female directors.