The efect of interlocking directorates on mergers and acquisitions in Brazil.

Abstract

This study investigates the efect of interlocking directorates on national and inter national mergers and acquisitions (M&A) in Brazil. Based on a sample of 153 large Brazilian frms 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 frms that have a larger number of ties with other frms through board interlocks (higher degree centrality) are more likely to perform M&A. Other network meas ures (closeness, eigenvector, betweenness, and structural holes) have no signifcant impact on the likelihood to participate in M&A. This study examines the impact of board interlocking on frms’ propensity to undertake M&A while controlling for fnancial, 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.