The paper is aimed at investigating the assertion that a director’s acquisition experience will have an impact on the acquisition decision of firms that hire them. This is true for firms that are focused on making an acquisition in the future as they would require to hire directors with a good record in acquisition as acquisitions certainly affect the firm’s value.
Different from prior papers positing that firms hire directors for their acquisition experience only, this paper specifically focuses on the relationship between whether the quality of prior acquisition experience results in better acquisition performance of firms that hire the directors and whether the firm’s acquisition returns are affected by the directors previous acquisitions. This is premised on the notion that firms may choose to hire directors with poor performing acquisitions if such directors are hired for other reasons other than good quality previous acquisition experience.
Findings from the paper indicate that a director’s acquisition experience has a positive influence on the acquisition performance of the firm that hires the director. Further, the paper indicates that for firms to get value in acquisitions, they should not only place emphasis on directors’ acquisition experience but also the quality of previous acquisitions. This is supported by the paper findings showing both a statistical and economical relationship between the quality of acquisition experience of directors and a firm’s value in future acquisitions.
According to the study therefore, if firms are looking for directors with prior acquisition experience to enrich the firm’s quality of acquisition, then they are in a better position hiring directors who not only have prior acquisition experience but whose quality of acquisition can be ascertained.