The Effects of CEO‐Board Interpersonal Networks on Cross‐Border Merger Outcomes

ABSTRACT We demonstrate that interpersonal relationships between the CEO and outside directors of the firm, referred to as board friendliness, significantly influence cross‐border merger outcomes. Analyzing deals across 34 countries, we find a positive investor reaction to merger announcements by firms with friendly boards. This effect is particularly strong for firms needing substantial advisory support and boards with better advising abilities. Acquirers with friendly boards are more likely to complete deals, contingent on strong institutional quality, robust regulatory standards, property rights protection, government integrity, accountability, economic and financial freedom, globalization and development status. Additionally, these acquirers experience superior postmerger financial performance.